GoSimpleTax

The term “side hustle” was first used in 1950s America. Although “hustle” suggests something illegal (originally hustle meant to swindle someone), it referred to ordinary people doing legal things to earn a few extra bucks.

Its meaning remains the same and side hustle has become a much more common term in the UK in recent years. Indeed, at times it seemed everyone was supplementing their main income by selling homemade greetings cards, cuddly toys, cakes and other things face to face or via  their own website, Facebook, eBay, Amazon or Etsy. Many people have successfully turned their hobby or passion into a money-spinning side hustle.

Important side hustle tax questions answered

Running a side hustle (or “side gig”) has become much easier and cheaper thanks to technology. Many people now run “dropshipping” side hustles, selling various products online to customers near and far without them having to store any stock. Side hustles can also provide the perfect opportunity to limit risk by trying out a business idea before you pack in your job and do it full time.

If you’re running your own side hustle or you’re thinking about it, tax is a key consideration. Whether innocently or otherwise, not paying tax on your side-hustle income can land you in hot water with HMRC (the UK tax authority). Although tailored tax advice from a trusted source is advised, this guide provides answers to key questions about paying tax on side hustle income.

Is your side hustle income taxable?

If you’ve simply sold off unwanted possessions online or via a local car boot sale, you won’t have to pay tax. They were personal possessions, it’s an occasional thing and you’re making relatively little profit. The same is true if, for example, you sell off your kids’ old toys on Facebook or your own pre-loved clothes via Vinted.

However, if you’re buying raw materials to make things to sell regularly or you’re buying stock to sell to customers, you’re trading and earning money from self-employment. This can be subject to Income Tax if your gross income (ie the total amount you make in sales) is more than £1,000. The “trading allowance” allows you to earn up to £1,000 of trading income tax-free.

If you’re trading, whether you’re making money from your hobby, selling things face to face or online – or selling services, such as babysitting, dog-walking, cleaning gutters, providing guitar lessons or you’re a paid tour guide at weekends – once your gross annual income is more than £1,000 it can be subject to Income Tax, dependent on how much other taxable income you earn. Some people rent out their driveways for parking near to football stadia, which can also be taxable if it’s more than £1,000 a year.

Need to know! Government website GOV.uk features an online tool that enables you to enter details to find out whether you need to tell HMRC about additional income.

What about freelancing or a second part-time job?

• If you freelance to supplement your main wage and earn more than £1,000 in gross income a year, you must report it to HMRC and pay tax on it, if your total taxable income goes over the Personal Allowance (£12,570 for the 2023/24 tax year).

• As regards second jobs, for example, if you work in a pub at weekends, as a part-time employee, you’ll likely be paid through the staff payroll and taxed accordingly, after supplying your tax code. You personally won’t need to submit a tax return to HMRC. However, you’ll need to report any tips you receive, because they can also be taxable income.

Do I need to register my side hustle?

If your gross trading income is more than £1,000 a year and you’ve never registered before, you must register for Self Assessment (unless you register and run your side hustle as a limited company, which is less popular and brings different rules and responsibilities).

After registering for Self Assessment, you’ll be sent your Unique Taxpayer Reference (UTR). And to submit your Self Assessment tax return online, you’ll need to set up a Government Gateway account (the letter from HMRC stating your UTR will tell you how). Once you’ve set up the account, you’ll get an activation code in the post.

When you register for Self Assessment, you’re letting HMRC know that you’re earning additional taxable income. If you haven’t registered for Self Assessment previously, you must do so before 5 October in your business’s second tax year, otherwise HMRC could fine you. The UK tax year runs from 6 April until the following 5 April.

Need to know! If you’ve submitted Self Assessment tax returns previously, you’ll need your old UTR to register and set up your new account.

How much tax is payable on my side hustle?

You pay tax based on your net profits, which is lower than your gross income (ie total sales revenue). Tax expenses that you claim are deducted from your side hustle income and once any tax allowances have been accounted for and your other taxable income factored in (which can include wages from employment), HMRC will work out your tax bill. You must provide all of these figures to HMRC via your tax return (which is why it’s called “Self Assessment”).

You’re taxed according to the Income Tax band into which you fall once your total taxable income has been worked out. The Income Tax band tax rates for the 2023/24 tax year are as follows:

The Personal Allowance decreases by £1 for every £2 of net income over £100,000 and if your net income is £125,140 or more, you don’t get the Personal Allowance. Income Tax bands and rates are different in Scotland.

Need to know! Side hustlers earning more than £12,570 a year must also pay Class 2 National Insurance contributions (NICs) of £3.45 a week (if over £6,725 and below £12,570 you don’t need to pay, but you’ll still receive the benefits that come from paying Class 2 NICs. Class 4 NICs of 9% are payable on profits between £12,570 and £50,270, with 2% payable on profits over £50,270 (*2023/24 tax year for all figures).

Can I claim any side hustle tax expenses?

To help lower your tax bill, potentially, you can claim for a wide range of tax expenses, which are legitimate costs that you pay to start and run your side hustle. You summarise these within your annual Self Assessment tax return. Depending on what side hustle you’re running and providing they are for legitimate business use, allowable expenses can include:

• raw materials or stock
• printing and packaging
• phone use and broadband
• fuel, parking, train or bus fares
• premises costs (eg rent, heating, lighting, business rates, etc)
• office stationery and postage
• advertising and marketing costs
• insurance and bank charges
• accounting and solicitor fees
• training and professional membership fees
• wages paid to others who work for you.

If you use something for your side hustle and personal reasons (eg a mobile phone), you can only claim allowable expenses for the business-cost proportion. You must use a reliable method to work out such costs and HMRC can ask you for proof of any allowable expense that you claim.

If you run a home-based side hustle, you may be able to claim for a proportion of your heating, electricity and water costs, Council Tax, mortgage interest or rent, broadband and telephone use.

• If you use traditional accounting (ie you record income and expenses by the date you invoiced or were billed), you claim capital allowances when you buy equipment, machinery or a car, van or lorry for your side hustle.

• If you use cash basis accounting (ie you only record income and costs in your accounts when you are paid or pay money out) and buy a car for your business, you can claim this as a capital allowance, but everything else must be claimed as an allowable expense.

Rather than working out your business expenses, you can claim flat-rate simplified expenses for vehicle use and working from home. You can’t claim any tax expenses or capital allowances if you claim the £1,000 tax-free Trading Allowance.

Need to know! Many expenses are not allowable for tax purposes, including entertaining customers, travel costs to and from your normal place of work, parking and speeding fines, a business suit, daily meal deal, etc.

What side hustle tax records must I keep?

Because you’re running a business, you must keep accurate, up-to-date records of your sales and expenses, detailing amounts and dates. If you grant credit, you should retain copies of all invoices you send out, as well as receipts and invoices for things you claim as tax expenses. Keep a detailed mileage log if you plan to claim for fuel costs.

Need to know! If your records are not accurate, complete and legible, HMRC can charge you a penalty, which can also apply if your Self Assessment tax return isn’t accurate. You must keep your records for at least five years after the 31 January online tax return deadline for each tax year.

Do I need to register for VAT?

• You must register for VAT if your total VAT-taxable turnover (ie sales or income that is subject to VAT) for the past 12 months was more than £85,000 (the VAT threshold for 2023/24) or you expect your VAT-taxable turnover to go over £85,000 in the next 30 days.
• You can choose to register voluntarily for VAT if your turnover is less than £85,000, which can be worthwhile if you’re paying a lot of VAT on the things you buy for your business.
• If you’re registered for VAT you must add the right amount of VAT to the price of all goods or services you sell; keep records of how much VAT you pay for things you buy; account for VAT for goods you import; digitally report the amount of VAT you charged and paid each quarter; pay any VAT you owe to HMRC.
• You cannot charge VAT unless you are VAT registered.

How do I report my taxable side hustle income?

You must complete and file a Self Assessment tax return (the SA100) each year, summarising your other taxable income, expenses, allowances, pension payments and benefits (if applicable). You must also complete and file the supplementary tax return page SA103, summarising your side-hustle income, tax expenses and any allowances.

After you’ve registered, you can file your tax return any time after the tax year finishes on 5 April, although the annual deadline for filing your Self Assessment tax return online, which is what most people do, is midnight on 31 January. If you miss the filing deadline, a £100 fine is payable immediately. Once HMRC receives your tax return, they’ll work out your tax bill and let you know how much you owe.

The deadlines for paying your tax bill are:

• 31 January for any tax you owe for the previous tax year (this is called a “balancing payment”) and your first “payment on account” (an advance payment towards your tax bill) and
• 31 July for your second payment on account.
• Should you prefer, by arrangement with HMRC, you can make weekly or monthly payments towards your bill.

Need to know! If you don’t pay income tax on your taxable side hustle income and HMRC finds out, you could be faced with a hefty fine. Late tax payments can also result in fines and interest, so the longer you delay paying your tax bill, the more you’ll owe HMRC.

Pennine Ventures – the North West-based team behind GoSimpleTax and Coconut – has acquired payroll software business, MyPAYE to better support sole traders, landlords and accountants.

This deal follows news in April last year that Pennine Ventures acquired Coconut, which has since been integrated with GoSimpleTax.

GoSimpleTax and Coconut are leading cloud bookkeeping and UK tax filing solutions, providing 24,000 customers with innovative bookkeeping, Self Assessment and VAT MTD filing software.

Adding MyPAYE continues this growth, establishing the business as a challenger in the UK cloud software space, with bookkeeping, seamless bank account integration, income tax filing and payroll for small businesses and their accountants.

GoSimpleTax Head of Partnerships, Leeanne Ogden says “As GoSimpleTax and Coconut grew we were receiving more inquiries from partners for a simple payroll solution to add to their member benefit offering. Acquiring MyPAYE made sense, it’s a leading cloud provider and makes payroll preparation easy for accountants, bookkeepers and individuals. I can see this becoming a fantastic addition to partner member benefits”

The acquisition creates immediate value for MyPAYE, Coconut and GoSimpleTax customers and partners alike.

About MyPAYE

MyPAYE is a great value-for-money payroll tool, easy to operate, and has many advantages even for the smallest business or bureau. Features include the easy emailing of encrypted payslips, summaries and statutory reports to clients, plus integrations with HMRC, leading bookkeeping packages and major pension providers. Timesheets and expenses are also available, and as it’s in the cloud, all functionality is accessible from anywhere.

The advantage of not having to update the software at year-end and backup numerous clients’ records saves time and payslips can be branded in line with the accounting practice. Support is timely and helpful, even at times of pressure such as year-end.

AIA Members can access MyPAYE here.

Significant changes to National Insurance were among the attention-grabbing announcements in Chancellor Jeremy Hunt’s Autumn Statement, which he made in November 2023. And what was perhaps even more notable is one would be introduced in January 2024, rather than April when the new UK tax year begins.

So, what National Insurance and Income Tax changes are being introduced in 2024 and what implications do they have for you? Let’s begin with changes in England, Wales and Northern Ireland, before looking at those planned for Income Tax in Scotland for 2024/25.

Main rate Class 1 National Insurance cut from 12% to 10%

From 6 January 2024, employee Class 1 National Insurance contributions (NICs) on earnings between £12,570 and £50,270 were reduced by 2% to 10%. The 2% rate on earnings above £50,270 will remain unchanged.

This will affect 27m people in the UK, giving them a welcome boost to their take-home pay packet, says the government. In 2024-25, according to HM Treasury, this is a “tax cut worth £450 for the average employee on £35,400 and means they will pay over 15% less NICs”.

Furthermore, says HM Treasury: “This action will [reduce] the current 32% combined tax rate for employees (ie Income Tax plus National Insurance) paying the basic rate of tax to 30% – the lowest since the 1980s”. This means: “An average worker in 2024-25 will pay over £1,000 less in personal taxes than they otherwise would have done” says HM Treasury.

• Salary Calculator Pro features a handy online tool so employees can find out how much less National Insurance they will pay.

Did you know? National Insurance was introduced in 1911 to support those who had lost their jobs or needed medical treatment. Later it was expanded to fund the State Pension and other benefits, as well as contribute towards funding the NHS.

Class 2 National Insurance abolished from April 2024

Currently, Class 2 NICs are paid by self-employed people who earn more than £12,570 a year. However, from 6 April 2024, that will no longer be the case, while – crucially – they will still get access to contributory benefits such as the State Pension.

Sole traders with profits of £6,725-£12,570 will also continue to get access to contributory benefits via a National Insurance credit, without paying Class 2s, as is currently the case (ie pre 6 April 2024).

The Small Profits Threshold (after which self-employed people start to receive National Insurance credits) will remain at £6,725. Those with profits below £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so. The weekly rate they pay will remain at £3.45 for the 2024-25 tax year.

Class 4 National Insurance cut from 9% to 8% from April 2024

Also from 6 April 2024, Class 4 NICs on earnings between £12,570 and £50,270 will be reduced by 1% to 8%. The 2% rate on earnings above the upper limit will be unchanged.

According to HM Treasury, the NIC changes will benefit two million people, saving the average self-employed person on £28,200 some £350 a year. “A typical self-employed plumber on £34,400 will be £410 better off as a result of these cuts”, it states.

What will stay the same?

• The main Income Tax allowances and thresholds, main NICs thresholds and the Inheritance Tax nil rate bands won’t change for 2024/25. As critics have been quick to point out, it means that as wages rise, more people in the UK will have to pay National Insurance.
• The NIC Class 1 primary threshold and Class 4 lower profits limit will remain at £12,570 (same as the Personal Allowance threshold).
• No changes either for the upper earnings limit and NIC Class 4 upper profits limit, which will remain at £50,270 until April 2028.
• The lower earnings limit (£6,396) and the small profits threshold (£6,725) will also remain the same in 2024/25.
• No changes were announced for 2024 or 2024/2025 for employers’ National Insurance contributions.

Some other notable changes for 2024/25

• As announced before the Autumn Statement, the Dividend Allowance will be halved to £500 for 2024/25.
• The Capital Gains Tax annual exempt amount for individuals and personal representatives will be halved to £3,000 for 2024/25.

What about Scotland?

Changes in Scotland’s 2024/25 budget will mean higher earners will pay more Income Tax. A new 45% band will be introduced for those earning between £75,000 and £125,140, while the top rate of tax, which is paid by those earning more than £125,000, will increase by 1% from 47% to 48%. The current threshold for paying the higher band (£43,663) won’t increase.

The changes will give Scotland six Income Tax bands, three more than the rest of the UK. Someone earning £50,000 in Scotland will pay £1,542 a year more than they would if they lived in another part of the UK, while those earning £150,000 will pay £6,000 more, according to the Scottish Fiscal Commission.

The Scottish government estimates that 114,000 people will pay the new advanced tax rate for those earning £75,000-£125,000, with an additional 40,000 people paying the top rate because they earn more than £125,000 a year (source: BBC News). Reportedly, the Income Tax changes are intended to help plug a £1.5bn funding shortfall in Scotland’s spending budget.

• The Scottish government has published a fact sheet detailing changes made to Scottish Income Tax for 2024 to 2025.

Like most other sole traders, your life is probably busy and stressful enough without having to worry about something else. However, there’s no avoiding the fast-approaching Self Assessment tax return online filing deadline, which each year is midnight on 31 January. Gulp.

Despite having good intentions, many UK sole traders leave completing their Self Assessment tax return until January. There really is no need. You can file your Self Assessment tax return any time after the tax year ends on 5 April. But,  in the real world, sole traders have so many other things to do. Plus – who enjoys doing tax returns?

What if you miss the online filing deadline?

The longer you leave it, the greater the risk of missing the Self Assessment tax return online-filing deadline. Many people do. In fact, a reported 600,000 people missed last year’s deadline. And if you think that’s a lot, some 2.3m people missed the January 2022 deadline, most as a consequence of the coronavirus pandemic.

There is an automatic £100 fixed penalty if you don’t file your tax return before the deadline. If you have a valid reason (eg partner’s death, you were seriously ill or hospitalised shortly before the deadline), you can appeal your £100 penalty.

Obviously, it’s better to complete your Self Assessment tax return long before the midnight 31 January online-filing deadline. Let’s assume that you’re already registered for Self Assessment. Here are six tips designed to help you get your Self Assessment tax return off your plate quickly and with less effort and panic.

1 Gather together all of the Self assessment tax return information you need

Making sure that you gather together in advance all of the information you need to complete your Self assessment tax return will speed things up significantly. As a sole trader you’ll need:

• your ten-digit Unique Taxpayer Reference (UTR) – you’ll have included it in previous tax returns
• your National Insurance number
• details of your income from self-employment and other taxable sources (eg share dividend payments, rental income, pension payments, capital gains, etc)
• summaries of costs you wish to claim as allowable tax expenses
• any contributions to charity or pensions which qualify for tax relief
• Your P60 or other records showing any income you received from employment that you’ve already paid tax on.

Top tip! If you’ve kept detailed accounting software records of your sole trader income and costs throughout the year, finding summary figures for your tax return will be a piece of cake. If you haven’t, you should seriously consider it going forward, because it can make tax returns far easier and quicker to complete (especially if your accounting software is integrated with tax return-filing software).

2 Know which tax return supplementary pages you must complete

As well as the main Self Assessment tax return (the SA100 form), sole traders must also fill out “supplementary pages” that summarise their self-employed income and costs. You use the SA103S pages if your annual business turnover was below the VAT threshold (£85,000 for 2023/24) and the SA103F pages if it was above. You may need to complete other supplementary pages, the SA105, for example, if you earned taxable rental income. The full list of supplementary pages is listed on government website GOV.UK.

3 Pick the right time and place to fill in your Self Assessment tax return

Don’t leave completing your Self Assessment tax return until days or even weeks before the online filing deadline. Do it now. Just because you file earlier doesn’t mean your tax bill will be payable any sooner. Having to battle a fast-approaching deadline creates additional pressure, which can actually slow you down, while if you rush or don’t prepare properly, you risk making mistakes.

If you free yourself from all distractions, you’ll complete your tax return much quicker. That means picking the right time and place, because any interruptions will impact your progress. If you can find a quiet, isolated place, it can make a big difference. If others are going to be near, tell them you need to be left alone to concentrate on your tax return. Turn off notifications on your phone; remain focused on your tax return.

4 Complete your Self Assessment tax return in one session

The average person is believed to take between three and four hours to complete their Self Assessment tax return and briefly check it at the end. Committing to complete your Self Assessment tax return in one sitting will be the quickest option. If you do it in a series of shorter sessions, it will take longer. Get together all of the information that you need; set aside four distraction-free hours and work through your tax return methodically. Take your time and get it right.

5 Use filing software to complete your Self Assessment tax return

Self Assessment tax returns can be filled out online and filed directly with HMRC, by visiting GOV.UK and signing in using your Government Gateway user ID and password. However, the only guidance you’ll get is from notes published elsewhere online by HMRC, which may or may not help you.

Alternatively, you can use commercial software, which can make filing your Self Assessment tax return far quicker and easier. Once you explain what taxable income you need to report, the software will guide you through relevant sections of the tax return and supplementary pages. The filing software should red flag any mistakes you make, while automatic prompts will tell you what information you need to enter where.

Self Assessment tax-return software can cost around £50 for the year, but it can be a price worth paying for the time you save and the peace of mind it gives. It’s also cheaper than paying an accountant to do your tax return, and you’ll still have to provide the information they need to complete the tax return.

6 Reach out for support

If you’re really pushed for time and you’re starting to panic because tax returns just aren’t your thing and you can afford it, to save time and hassle, you could pay an accountant to sort out your Self Assessment tax return for you. If your return is reasonably straightforward, expect to pay about £150-£250. You’ll pay more if your tax affairs are more complex.

If you decide to do your own Self Assessment tax return but want additional peace of mind, perhaps because you lack experience or your tax affairs are more complex, you can pay an expert to look over your tax return once you’ve completed it. About £100-£200 or so should do it. This should ensure that you haven’t made any mistakes. The expert might even suggest ways that you could reduce your next and subsequent tax bills.

As a final word, however determined you are to complete your Self Assessment tax return as quickly as possible, never let that be at the expense of accuracy and doing a good job. Otherwise you may later need to correct your tax return, which will only take up more of your valuable time.

Airbnb’s success is truly amazing. The story began in 2007, when the first two Hosts welcomed three guests to their San Francisco home. Airbnb now has more than 4m Hosts worldwide who have welcomed more than 1.5bn guests in more than 220 countries.

There are hundreds of thousands of active UK Airbnb listings and the most popular visitor locations are London, Edinburgh, Glasgow and Manchester. In 2022, the typical UK Host was reported to earn just over £6,000 by renting their space on Airbnb, with more than a third doing it to help them cope with rising living costs.

Many report their taxable Airbnb income to HMRC as required. Others, whether knowingly or not, fail to report their Airbnb income, and are therefore guilty of tax evasion. That could be about to come to an end thanks to an HMRC crackdown that began in 2023 but will continue in 2024 and beyond.

HMRC investigation into Airbnb income

Seeking to find UK Airbnb Hosts guilty of tax evasion, HMRC has launched an investigation into income going back to 2017-2018. As explained on the company’s website, Airbnb is required by law to provide “a limited amount of data about transactions that take place on the Airbnb platform to HMRC when requested”.

Airbnb will share with HMRC “data for all transactions on the platform during the 2017/18 and 2018/19 tax years”, in relation to a “listing in the UK or a listing owned by a Host that’s required to pay tax in the UK”. The sharing of Airbnb income data for subsequent years seems inevitable, with Airbnb stating: “We will provide data if HMRC makes similar requests for information in future”.

HMRC data requests to Airbnb have already generated many leads, with the UK tax authority having sent out hundreds of “nudge letters” in 2023 to Hosts suspected of not paying tax on their Airbnb income. Many more letters look likely to follow. HMRC is reported to also have in their sights those advertising properties on online rental platforms such as Booking.com and Vrbo.

What can happen if you haven’t declared Airbnb income?

If you haven’t declared your Airbnb income, if discovered, the penalty you pay will be determined by whether your actions were deliberate or not.

• If you unknowingly made a genuine mistake, although you’ll have to pay any tax due, you won’t have to pay a penalty.
• If you didn’t take reasonable care, you may face a penalty of up to 30% of the tax due, plus the tax you owe.
• Deliberate errors can lead to a fine of 20%-70% of the tax due, plus the tax you owe.
• If you knowingly made an error and sought to deliberately conceal it from HMRC, the penalty is 30%-100% of the tax due, plus the tax you owe.

Need to know! HMRC can open a “discovery assessment”, which is an inquiry into the last four years of your tax affairs (it goes up to six years if you didn’t take reasonable care). If you’ve been guilty of gross dishonesty about your tax affairs, an HMRC investigation can go back 20 years.

What should you do if you haven’t been paying tax on Airbnb income?

If you haven’t been paying enough or any tax on your taxable Airbnb income, you need to act immediately if you are to minimise the penalty.

• HMRC’s Let Property Campaign enables landlords who owe tax after letting out residential property in the UK or overseas to “get up to date with their tax affairs in a simple way and take advantage of the best possible terms”.
• First you must notify HMRC that you want to take part. Then you disclose all income or gains you have not previously told HMRC about and state which penalty you believe you should pay, before making a formal offer to pay tax due and then paying it. Throughout, you must cooperate fully with HMRC, providing any information that HMRC requests.
• HMRC will take into account how cooperative you’ve before deciding what action to take. If you have deliberately hidden information from HMRC, you’ll pay a higher penalty than if you have made a simple mistake.
• Visit the HMRC pages of GOV.UK for more information on the Let Property Campaign.

Paying tax on Airbnb income: the basics

• Income Tax is often payable on Airbnb income.
• Whether you pay tax on your Airbnb income and how much if so is determined by: whether you’re renting out an entire property or just a room in your house; how much income you earn from Airbnb; and how much taxable income you earn from other sources.
• If you live in the property and earn less than £7,500 a year from hosting on Airbnb, thanks to the Rent-a-Room scheme, no tax is payable.
• If you earn more than £7,500 a year, you’ll need to report it to HMRC via a Self Assessment tax return, but you’ll only pay tax on the amount above £7,500.
• You must only rent a single furnished or unfurnished room in a property that is your main residence.
• If you own the property with someone else, the Rent-a-Room allowance is split, giving each of you a tax-free allowance of £3,750 a year. If you claim relief via the Rent-a-Room scheme, you can’t claim tax expenses as well, so you’ll need to work out which option is more tax-efficient for you.
• Visit GOV.UK to learn more about the Rent-A-Room scheme.
• If you host a second property or a property that you don’t live in on Airbnb, you can earn up to £1,000 tax-free each year. This is your property allowance.
• Any income over this amount can be subject to Income Tax, determined by what income band your total income places you in.
• The Income Tax bands for Scotland can be seen on mygov.scot, while the Income Tax rates for the rest of the UK are on GOV.UK.
• Wherever you live, you don’t pay tax until your total income goes over the personal allowance threshold (£12,570 for the 2023/24 tax year).
• If you’re earning taxable income from a property that you do not own which you’re a Co-Host on a listing, you’ll still be taxed as if you owned the property.
• If you need to pay tax on your income as a Host on Airbnb, each year you’ll need to fill in a Self Assessment tax return.

Need to know! If you have to pay expenses exclusively to run your Airbnb business, you can deduct them from your income, which will help to reduce your tax bill.

Common examples include general maintenance and repairs, water rates, council tax, gas and electricity, cleaning, accountancy fees, rental commission, insurance.

According to HMRC, 11.7m taxpayers filed their 2021-22 Self Assessment tax return before the midnight 31 January 2023 deadline. About 800,000 filed on deadline day, with 36,000 doing so within the final hour. Talk about leaving it late.

Some will no doubt have been surprised to later find out that their Self Assessment tax return contained mistakes that needed correcting. The same thing happens every year.

Why do people make Self Assessment tax return mistakes?

Self Assessment tax return mistakes are understandable, especially if you’re battling the deadline and juggling other things. Stress makes mistakes more likely.

Lack of knowledge/experience is another obvious reason why people make Self Assessment tax return gaffes. It’s more likely if you’ve never completed a Self Assessment tax return before. And trying to file directly with HMRC online, without the reliable hand-holding from commercial Self Assessment tax return filing software can also lead to blunders.

Some mistakes are bigger than others, of course. And, after filing, you may realise that you’ve made an error or HMRC may tell you that you’ve got something wrong. Where minor and innocently made, there can be no consequences. But if you’re found to have wilfully falsified information to fraudulently reduce your tax bill, HMRC will fine you (you can be sent to prison for serious tax evasion).

So, where do sole traders often go wrong when completing their Self Assessment tax returns and how can you make sure that you don’t fall into the same trap?

Common sole trader Self Assessment tax return mistakes

1. Missing or incorrect UTR or NI number

You’re issued a ten-digit Unique Taxpayer Reference (UTR) when you register for Self Assessment. It enables HMRC to identify you as a taxpayer, which is why you need to include it in your Self Assessment tax return.

If you don’t know your UTR, you can find it in your Personal Tax Account, the HMRC app or previous sole trader tax returns. HMRC includes it in correspondence it sends you. Alternatively, contact the Self Assessment helpline. Take your time when entering your UTR into your tax return. Get it right the first time.

If you don’t know your National Insurance (NI) number, it, too, can be found in your Personal Tax Account, the HMRC app or previous payslips or P60s. Alternatively, HMRC can help you.

2. Not reporting all of your taxable income

You must report all income within your Self Assessment tax return so that HMRC can make sure you’re paying all due tax and National Insurance. As well as your sole trader income, this can include:

• wages from employment (UK or overseas)
• tips and commission payments
• rental income (UK or overseas)
• savings interest
• share dividend payments
• pension payments (UK and overseas)
• state benefits (eg maternity pay)
• capital gains made from selling taxable assets.

Some people fail to report some income because they genuinely have no idea that it’s taxable. However, you are responsible for ensuring that all taxable income is reported to HMRC, so that you pay the appropriate level of Income Tax and National Insurance (that’s why it’s called Self Assessment).

Need to know! Be sure to research and report all of your income as required via your Self Assessment tax return and supplementary pages (see below). If unsure, contact HMRC for guidance.

3. Missing Self Assessment tax return supplementary pages

Different sources of taxable income are reported to HMRC individually using supplementary tax return pages. Such pages are filed at the same time as the main eight-page tax return (i.e. the SA100).

Sole traders (which can of course include freelancers) must fill out an SA103 form. Members of ordinary business partnerships must file an SA104. If you earn income from a UK rental property you must fill out an SA105. Non-UK income or gains must be reported via an SA106, while an SA108 is used to report capital gains.

Need to know! The full list of Self Assessment tax return supplementary pages is listed on the government website GOV.UK. Be clear about which ones you need to file. You may need to file various supplementary pages, determined by your income sources.

4. Not claiming all of your allowable tax expenses

Thankfully many costs you incur to run your sole trader business can be claimed as allowable expenses. As the name suggests, HMRC allows you to deduct them from your income before it works out your tax bill. GOV.UK features a summary of sole trader allowable expenses.

A wide range of allowable sole trader expenses can be claimed, but you need to remember to enter them in your SA103. A common mistake is for sole traders to fail to claim all of their allowable expenses, which means they pay more tax than is necessary. Similarly, expenses can be claimed against other income sources.

5. Ticking the wrong Self Assessment tax return boxes

Again, this is easily done if you lack experience, you rush or you’re not concentrating enough when filling in your Self Assessment tax return. When you’re filling in a Self Assessment tax return, it can certainly be a case of “less haste more speed”. Reading the guidance notes as you make your way through your Self Assessment tax return can stop you ticking the wrong boxes. Using Self Assessment tax return filing software can also help to ensure that you do not tick the wrong boxes.

6. Making pension contribution mistakes

If you pay into a pension, you summarise your contributions within the tax reliefs section of your SA100 Self Assessment tax return.

• Under “Payments to registered pension schemes where basic-rate tax relief will be claimed by your pension provider”, you include the total gross value of your personal pension contributions.
• On page 4 of the SA100 Self Assessment tax return, fill in boxes 1 to 3 for payments to registered pension schemes and box 4 for payments to overseas pension schemes.
• On page 3 of the SA100 tax return, you complete boxes 8 to 12 to provide details of gross UK pensions and annuities received, including lump sums, whether State Pension or private pension.

Amending your Self Assessment tax return

If you’ve filed your tax return and made a mistake, you can make changes within 12 months of the Self Assessment filing deadline. For example, you have until 31st January 2025 to correct any errors in your tax return for 2022/23. Depending on the mistake, you may have to pay more tax or claim a refund if you’ve overpaid as a result. Better to take your time and enter the right figures at the first time of asking.

Like most other sole traders, your life is probably busy and stressful enough without having to worry about something else. However, there’s no avoiding the fast-approaching Self Assessment tax return online filing deadline, which each year is midnight on 31 January. Gulp.

Despite having good intentions, many UK sole traders leave completing their Self Assessment tax return until January. There really is no need. You can file your Self Assessment tax return any time after the tax year ends on 5 April. But, in the real world, sole traders have so many other things to do. Plus – who enjoys doing tax returns?

What if you miss the online filing deadline?

The longer you leave it, the greater the risk of missing the Self Assessment tax return online-filing deadline. Many people do. In fact, a reported 600,000 people missed last year’s deadline. And if you think that’s a lot, some 2.3m people missed the January 2022 deadline, most as a consequence of the coronavirus pandemic.

There is an automatic £100 fixed penalty if you don’t file your tax return before the deadline. If you have a valid reason (eg partner’s death, you were seriously ill or hospitalised shortly before the deadline), you can appeal your £100 penalty.

Obviously, it’s better to complete your Self Assessment tax return long before the midnight 31 January online-filing deadline. Let’s assume that you’re already registered for Self Assessment. Here are six tips designed to help you get your Self Assessment tax return off your plate quickly and with less effort and panic.

1. Gather together all of the Self assessment tax return information you need

Making sure that you gather together in advance all of the information you need to complete your Self assessment tax return will speed things up significantly. As a sole trader you’ll need:

• your ten-digit Unique Taxpayer Reference (UTR) – you’ll have included it in previous tax returns
• your National Insurance number
• details of your income from self-employment and other taxable sources (eg share dividend payments, rental income, pension payments, capital gains, etc)
• summaries of costs you wish to claim as allowable tax expenses
• any contributions to charity or pensions which qualify for tax relief
• your P60 or other records showing any income you received from employment that you’ve already paid tax on.

Top tip! If you’ve kept detailed accounting software records of your sole trader income and costs throughout the year, finding summary figures for your tax return will be a piece of cake. If you haven’t, you should seriously consider it going forward, because it can make tax returns far easier and quicker to complete (especially if your accounting software is integrated with tax return-filing software).

2. Know which tax return supplementary pages you must complete

As well as the main Self Assessment tax return (the SA100 form), sole traders must also fill out “supplementary pages” that summarise their self-employed income and costs. You use the SA103S pages if your annual business turnover was below the VAT threshold (£85,000 for 2023/24) and the SA103F pages if it was above. You may need to complete other supplementary pages, the SA105, for example, if you earned taxable rental income. The full list of supplementary pages is listed on government website GOV.UK.

3. Pick the right time and place to fill in your Self Assessment tax return

Don’t leave completing your Self Assessment tax return until days or even weeks before the online filing deadline. Do it now. Just because you file earlier doesn’t mean your tax bill will be payable any sooner. Having to battle a fast-approaching deadline creates additional pressure, which can actually slow you down, while if you rush or don’t prepare properly, you risk making mistakes.

If you free yourself from all distractions, you’ll complete your tax return much quicker. That means picking the right time and place, because any interruptions will impact your progress. If you can find a quiet, isolated place, it can make a big difference. If others are going to be near, tell them you need to be left alone to concentrate on your tax return. Turn off notifications on your phone; remain focused on your tax return.

4. Complete your Self Assessment tax return in one session

The average person is believed to take between three and four hours to complete their Self Assessment tax return and briefly check it at the end. Committing to complete your Self Assessment tax return in one sitting will be the quickest option. If you do it in a series of shorter sessions, it will take longer. Get together all of the information that you need; set aside four distraction-free hours and work through your tax return methodically. Take your time and get it right.

5. Use filing software to complete your Self Assessment tax return

Self Assessment tax returns can be filled out online and filed directly with HMRC, by visiting GOV.UK and signing in using your Government Gateway user ID and password. However, the only guidance you’ll get is from notes published elsewhere online by HMRC, which may or may not help you.

Alternatively, you can use commercial software, which can make filing your Self Assessment tax return far quicker and easier. Once you explain what taxable income you need to report, the software will guide you through relevant sections of the tax return and supplementary pages. The filing software should red flag any mistakes you make, while automatic prompts will tell you what information you need to enter where.

Self Assessment tax-return software can cost around £50 for the year, but it can be a price worth paying for the time you save and the peace of mind it gives. It’s also cheaper than paying an accountant to do your tax return, and you’ll still have to provide the information they need to complete the tax return.

6. Reach out for support

If you’re really pushed for time and you’re starting to panic because tax returns just aren’t your thing and you can afford it, to save time and hassle, you could pay an accountant to sort out your Self Assessment tax return for you. If your return is reasonably straightforward, expect to pay about £150-£250. You’ll pay more if your tax affairs are more complex.

If you decide to do your own Self Assessment tax return but want additional peace of mind, perhaps because you lack experience or your tax affairs are more complex, you can pay an expert to look over your tax return once you’ve completed it. About £100-£200 or so should do it. This should ensure that you haven’t made any mistakes. The expert might even suggest ways that you could reduce your next and subsequent tax bills.

As a final word, however determined you are to complete your Self Assessment tax return as quickly as possible, never let that be at the expense of accuracy and doing a good job. Otherwise you may later need to correct your tax return, which will only take up more of your valuable time.

Businesses usually fail because they run out of cash and can’t pay their bills when required. Although non-payment and late payment remain a big problem for many small UK businesses, one that causes serious cash flow issues, others get into difficulties because they live beyond their means.

Letting your spending exceed your income is a dangerous mistake that can soon prove fatal. However, budgeting offers a reliable solution to businesses of all sizes, new and established, because it enables you to control your spending and costs.

What is budgeting?

Budgeting is something many of us already do in our personal lives. It’s no different in business. Budgeting simply means working out how much you can afford to spend, deciding where or how you should spend it and then controlling your spending so that you live within your means and keep your cash flow healthy, providing that you make enough sales and get paid on time (if you grant credit).

Spending too much in one area of your business might seem like a relatively minor thing. But if you do that throughout your business it can create a far bigger cash flow problem. And if you don’t set and work with spending budgets, you may not realise that you’re spending too much until it’s too late.

How to set budgets

You need to start by working out your likely income for each month for the year ahead. Your income may fluctuate at different times of the year, which is true for many businesses. Once you have a reliable/realistic idea of how much your sole trader business is likely to bring in, take away the amount that you need to earn to cover your living costs (don’t forget, you’ll also pay tax on your income). That will give you an idea of your spending budget, although you may decide to increase or decrease it.

Example 1

• If you expect your self-employed income for the year to be £36,000 (£3,000 a month), you’ll pay about £7,000 in Income Tax and National Insurance contributions, which leaves £29,000.
• If you want/need to earn £24,000, you have a yearly budget of roughly £5,000 (£420 a month) to operate your business. If that’s not enough, you’ll have to increase your business income or settle for less take-home.

Example 2

If you expect your self-employed income for the year to be £52,000 (£4,300 a month), and need a budget of £1,500 a month to run your business, which you claim as allowable expenses, you’ll pay about £7,700 in Income Tax and £3,600 in National Insurance contributions, which leaves £39,000 for you in take-home (2023/24 tax year for approximate figures given).

Setting monthly budgets

Once you know how much you can afford to spend to run your business over the course of a year, you can create monthly budgets for all key cost areas of your business (eg premises, materials, travel, marketing, finance, sub-contractors/freelancers, etc).

You may have to adjust these for different months, for example, if you know you’ll be traveling less in certain months of the year or you can spend less or nothing on marketing because you’re less likely to sell during certain months. Always seek to allocate budget to areas where it will bring the best results and enables you to meet your business objectives/targets.

Working with your monthly budgets

• You need to realise the importance of budgeting and working with budgets. Budgeting forces you to think carefully about how your business spends money, which can ensure that you don’t waste money or put your business at risk by overspending.
• Budgeting also encourages you to gauge the value for money that you get for every pound you spend running your business.
• Get into the habit of looking at your accounts each month to carefully assess your actual business costs against your set monthly budgets in key areas.
• Avoid overspending wherever possible. If you overspend in one area, look for savings in others.
• If you’re spending less against a set budget, reduce your monthly budget in that area and consider recommitting funds to other areas.
• If your actual sales are less than expected during one month, you may need to reduce your monthly budget for the following month(s), so that your sole trader business is not spending at an unsustainable level.
• Once you get to the end of the year, reassess your budgets and reduce or increase them where necessary, obviously, remaining within your overall budget for the year ahead.

Setting budgets can be tricky for both variable and (so-called) fixed costs, because, in truth, both can change over the course of a year. If you lack experience, you may be able to improve your budget-setting and budget-management skills, but you should never forget how important budgeting is to successful cash flow control. If you don’t work with budgets, you have no reliable idea of how much your sole trader business can afford to spend, which is highly risky, especially in times like these where prices have risen significantly, very quickly, in most areas.

This guide provides basic information about completing Self Assessment tax returns if you’re a minister of religion. That could mean you’re a vicar, reverend, priest, rabbi, imam or other religious leader or person acting on behalf of a faith or church, mosque, synagogue, temple, etc.

You’ll be able to find out about:

• the SA100 tax return and SA102M supplementary page
• tax expenses that you can claim as a minister of religion
• how to complete and file your minister of religion tax return
• further sources of information and guidance.

Reporting taxable income as a minister of religion

When reporting taxable income to UK tax authority HMRC, ministers of religion must complete the SA100, the main Self-Assessment tax return, which is eight pages long.  The most relevant income sources that need to be given are likely to be investment and pension income, but there could be other taxable sources.

On page 4 of the SA100, reliefs can be claimed for pension contributions that are not deducted from stipend (ie fixed regular sum paid as a salary or expenses to ministers of religion) through PAYE, as well as Gift Aid payments and Blind Person’s Allowance (if relevant).

Ministers of religion must also complete the SA102M supplementary page to report their income and expenses as a minister. Taxable income can include:

• salary, fees, commissions, overtime, bonuses and other contractual payments, even if you’ve paid some of it to a charity
• fees and offerings for performing your minister duties
• gifts and grants you receive because you’re a minister
• Statutory Sick, Maternity, Paternity or Adoption Pay paid by an employer.

HMRC uses the information you provide within your tax return to work out how much tax you owe. You’ll need to fill in separate SA102Ms for each ministerial post held in the tax year (ie 6 April until the following 5 April).

Need to know! There is an alternative four-page short Self Assessment tax return (the SA200) for use in less complex cases, which may better suit retired ministers. However, you should only use it if told to do so by HMRC.

Paper or online Self Assessment tax return?

Very few Self Assessment taxpayers (about 4.4%) continue to complete and file paper Self Assessment tax returns. Even if you’re experienced, filling them in is a tedious, time-consuming task, where mistakes can be more likely, and there are no prompts to help you.

Filling in and filing your minister of religion tax return online can save you lots of time and effort, with mistakes less likely. However, you cannot file your tax return online via the HMRC website – you must use commercial software. That’s likely to only cost about £50 a tax year, which can be a price well worth paying for the benefits and added convenience  that it brings.

Need to know! Automatic prompts from the software tell you what information you need to enter and where it should go, which provides additional peace of mind, while helping to ensure that you don’t pay too much tax.

When must ministers of religion submit their tax return?

• If you file your minister of religion tax return online, you must do so before midnight on the 31 January, following the end of the tax year to which the return refers. The UK tax year always ends on 5 April.
• It can be filed any time after 5 April, you do not have to wait until 31 January. In fact, your life will probably be much less stressful if you complete and file your minister of religion tax return much sooner.
• Another reason to not file a paper tax return is the filing deadline is earlier. Paper tax returns must be filed before midnight on 31 October following the end of the tax year (5 April) to which the tax return refers.
• If you file your tax return after the deadline, immediately you’ll have to pay a £100 fine. After three months, another fine is payable.

How to work out your taxable income as a Minister of Religion

When completing your Self Assessment tax return, you can find out what you’ve earned and the tax you’ve paid from your P45 if you’ve left employment (eg if you’ve recently retired) or from your P60 if you’re still employed.

Other taxable income ministers receive that they will need to summarise in their SA100 if it is subject to tax can include casual fees, pension payments and investment income.

• If a minister receives taxable income from rented out property or land, they will also need to file an SA105 supplementary page, summarising taxable income and expenses claimed.
• If a minister receives taxable capital gains within a tax year, for example, after selling a property that is not their main home, they will also need to complete a SA108 form and submit it with their SA100 and SA102M.

Need to know! If you received any benefits or non-exempt expenses payments, you’ll need to include them in your SA102M. This can include rent and utilities you’re reimbursed. Your church/mosque/synagogue/temple will provide you with details via form P11D (ie a tax form filed by employers to report benefits provided and expense payments made to employees that are not put through the business/company payroll).

What allowable expenses can Ministers of Religion claim?

Allowable expenses you may be able to claim include:

• private rent not paid by the church/mosque/synagogue/temple.
  • private heating, lighting, repairs and maintenance costs.
  • replacing robes worn for service.
• new ceremonial items.
• ceremonial food and drink.
• religious minister training.
  • subscriptions that enable you provide a better service.
  • journeys from one place of work to another.
  • secretarial assistance for your duties.
  • reasonable entertainment costs for visiting clergy members.
  • postage and stationery.

Need to know! Separating expenses into a ‘self-paid’ and ‘reimbursed’ list will make completing your Self Assessment tax return much easier, which will be even quicker and simpler if you use tax return software.

How much rent can Ministers of Religion claim?

The maximum amount of rent you can claim as a minister is 25% of the total cost. You may work in a home office, for example, or perform other duties in your home, for which you can claim allowable expenses to reduce your tax bill.

You’ll need a reliable method of working out what proportion or percentage of your total rent you can claim, if not paid by a church/mosque/synagogue/temple. This should be based on the total number of rooms. So, for example, if you live in a house with six rooms and use one room for your ministerial work (ie admin, study, research, etc) eight hours a day, you charge for a sixth of your total rent divided by three.

Example:

Total yearly rent:                                      £1,500 x 12 = £18,000

Divided by number of rooms:                    £18,000 divided by 6 = £3,000

Used for eight hours a day:                       £3,000 divided by 3 = £1,000

Allowable expenses claim for rent =           £1,000 a year.

Other domestic costs for electricity and other things are allowable and can be added, claimed on the same proportional basis, which would further reduce your tax bill. But as stated, you cannot claim more than 25% of your total rental costs for rent as an allowable expense.

What is the service benefit cap?

If you receive payments, services or goods on which tax has not been charged, these are “benefits in kind”. If they relate specifically to your accommodation, they’re called service benefits. They can include tax-free reimbursement for heating, lighting, cleaning and gardening costs, or repairs, maintenance, decoration, furnishings or domestic appliances that were your responsibility, but which were paid for or provided by someone else.

If the income from the post where a service benefit came is less than £8,500 within the tax year, no tax is payable. This is the service benefit cap. If it is more than £8,500, tax is payable. It will be charged at the total value of the service benefit or 10% of your net earnings from the post, whichever is lowest. You’re responsible for doing this calculation when filling out your SA102M.

Do ministers need to pay someone to fill in their tax return?

Depends on how complex your tax affairs are – in most cases not. If your tax affairs are relatively straight-forward, you should be able to fill in your own tax return and supplementary pages (most people do it in a few hours, if all of the necessary figures are to hand).

Using Tax return filing software makes the job much simpler and quicker, with mistakes much less likely. If your tax affairs are more complex (or they are in a particular tax year), paying for tailored tax advice can be worthwhile. Not only can it prevent overpayment of tax, but it can also ensure that you comply with requirements.

More than 120,000 expat Brits are reported to live in Dubai, the UAE’s second-largest emirate (Abu Dhabi is the biggest). Many are attracted by Dubai’s sunny climate, as well as its family-centred, clean and safe environment (serious crime is almost non-existent).

The beaches are beautiful, and while its traditional Arabic heritage remains, Dubai is a multicultural metropolis with modern infrastructure and awesome architecture, including the world’s tallest building (the 830-metre-high Burj Khalifa) and the largest shopping mall on Earth (shopping is another reason why people love Dubai).

Dubai attracts about 14.3m international visitors each year and about 1.5m of them are from the UK. Many Brits continue to relocate to Dubai, attracted by excellent career opportunities, a tax-free salary and a higher standard of living. If you’re thinking about moving to Dubai, you’ll probably be wondering about visas and how much tax you’ll pay.

Which visa to live in Dubai?

• Freelancers, the self-employed and skilled employees can apply for a UAE Green Visa, a residency visa that enables someone to sponsor themselves for five years, they don’t need sponsorship from a UAE national or employer. The Green Visa is renewable for five more years upon expiry.
• Freelancers or self-employed people must get a permit from the Ministry of Human Resources and Emiratisation (MHRE). They also need proof of their degree or diploma, as well as evidence of self-employed income for the previous two years of at least 360,000 UAE Dirhams (about £77,000), or proof that they have enough money to sustain their stay in the UAE.
• Skilled employees must have a valid employment contract, salary of at least 15,000 AED (£3,200) a month, a degree or equivalent and their occupation must be of a sufficiently high professional level according to the MHRE.
• A two-year standard employment work visa is available to those coming to work in the UAE’s private sector. The employer applies for this.
• Over-55s who wish to retire in the UAE can apply for a five-year Residence Visa, which is renewable, although they will need significant property assets or income.

Telling HMRC that you’re moving to Dubai

You must tell UK tax authority HMRC if you’re leaving the UK to live abroad permanently or going to work abroad full-time for at least one full tax year (6 April to 5 April). This applies to Dubai, of course.

If you don’t normally complete a Self Assessment tax return and you’ve already left the UK, you need to fill in form P85 online. If you’re still in the UK, fill in form P85 offline and include Parts 2 and 3 of your P45 form (get these from your employer).

If you usually complete a Self Assessment tax return (eg because you’re self-employed or a landlord), you’ll also need to complete the ‘resident’ supplementary page (form SA109) to report your residence and domicile status once you’re living in Dubai.

You must use commercial software to file all forms – you won’t be able to do it online via GOV.UK (it’s not available to people who live outside the UK). Alternatively, you can get a UK-based accountant to do it for you, but you’ll have to pay a fee. Doing it yourself is cheaper and reasonably easy. HMRC will let you know if you’re owed a refund for the tax year during which you left the UK.

If you don’t normally submit a tax return, you’ll first need to register for Self Assessment by 5 October following the tax year in which you had taxable UK income, otherwise you could be charged a penalty.

Need to know!

You also need to let your local council know if you’re leaving the UK to live in Dubai or anywhere else, so that you’re not charged Council Tax (if applicable). Your UK citizenship will not be affected by moving and you can usually vote in UK elections.

Paying tax if you’re non-resident

If you’re “non-resident” in the UK for tax purposes, no UK tax is payable on any income or gains that you earn or make in Dubai.

• You’re usually non-resident for UK tax purposes if you: spent less than 16 days in the UK (or 46 days if you have not been a UK resident for the three previous tax years); worked abroad full-time (averaging at least 35 hours a week) and spent less than 91 days in the UK and no more than 30 of them were spent working.

Although there is no Income Tax in Dubai, you’ll need private medical cover – it’s a legal requirement. If applicable, your employer must provide basic health insurance, but that doesn’t extend to dependents (eg a spouse or children) and it comes from deductions from your salary. If you work for yourself or don’t work, you’ll need to sort out your own private medical cover.

If you’re non-resident in the UK for tax purposes because you’ve moved to Dubai, UK tax may be payable on income earned in the UK. Taxable UK income can include:

• pension payments
• rental income
• savings interest
• wages from UK employment.

Need to know! If you don’t claim any tax expenses, you do not pay tax on the first £1,000 of UK property rental income or income from UK self-employment.

How much UK Income Tax will you pay?

If you’re eligible for the tax-free Personal Allowance (you don’t get it if your taxable income is more than £125,140 a year), you won’t pay tax on your total UK taxable income until it is more than £12,570 (2023/24 figure) in a tax year.

You pay tax on your profit, which is the amount of UK income that remains once tax expenses or allowances have been deducted. If you rent out more than one UK property, the profits or losses from them all are added together to arrive at a total figure and you will be taxed on that basis.

The amount of UK Income Tax you pay is determined by the Income Tax band into which your total UK taxable income falls.

• The basic rate (20%) is payable on annual UK taxable income between £12,571 and £50,270.
• The higher rate (40%) is payable on annual UK taxable income of between £50,271 to £125,140.
• The additional rate (45%) is payable on annual UK taxable income over £125,140.

You may be able to claim a range of tax reliefs and allowances to reduce your taxable UK income. Income Tax is no longer automatically taken from interest on savings and investments. Non-residents do not usually pay UK tax on the UK State Pension or interest from UK government securities (ie gilts).

How to report your taxable UK income from Dubai

If you live in Dubai (or elsewhere overseas) and receive taxable income from UK property or have other taxable UK income to report to HMRC, you must fill out and file a Self Assessment tax return (SA100), as well as the resident supplementary page (the SA109 form) to report your residence and domicile status.

• If you have UK taxable rental income to report, you’ll also need to fill out and file the SA105 form.
• If you have taxable UK income from self-employment, you’ll also need to fill out and file the SA103 form.
• You may have to file other supplementary pages, depending on your income sources.

You can’t use HMRC’s online services to file your Self Assessment tax return and any supplementary pages if you’re living in Dubai (or anywhere else overseas). You can either fill out your forms by hand and send them by post, get a UK-based tax professional to do it for you or you can use commercial Self Assessment filing software, which is a cheaper option and it’s simple enough.

• The filing deadline for a paper Self Assessment tax return is midnight on 31 October following the end of the tax year to which the tax return refers.
• The UK tax year runs from 6 April until the following 5 April.
• If you use filing software and choose to file online, the deadline is midnight on 31 January following the end of the tax year to which the tax return refers.
• Another key advantage of using filing software is you get more time (ie three months) to complete your Self Assessment tax return.

More on paying UK tax on UK rental income

If you earn more than £1,000 from renting out property in the UK, it can be subject to Income Tax, once your taxable income goes over the Personal Allowance (£12,570 a year in 2023/24). Capital Gains Tax can also be payable if you make a “chargeable gain” (ie after selling you get more than the amount you paid for the property or land).

If you live outside of the UK for six months or more a year, HMRC classes you as a “non-resident landlord”, regardless of whether you’re a UK resident for tax purposes or not. You can choose to get the full amount of rent from your tenant(s) and pay tax on it via Self Assessment. If so, you need to apply by filling out the NRL1i form and sending it to HMRC.

The other option is for the tax to be deducted by your letting agent or tenant, who will pay it to HMRC on your behalf. They will deduct the basic rate tax from the monthly rent (minus any expenses if an agency) and give you a certificate at the end of the tax year detailing the tax they’ve deducted.

You’ll need to keep accurate records of your rental income and expenses, because HMRC can ask for proof of the Self Assessment figures you report. You must keep your records for at least five years after the filing deadline for each tax year.

Need to know! If you report your UK rental income via Self Assessment from Dubai, as a landlord, you can claim a range of “allowable expenses” to cover things you pay for to rent out your property. Claiming these can reduce your UK tax bill significantly. Visit GOV.UK for official guidance on paying UK tax on UK property rental income.

Register as a sole trader or set up a limited company? It’s a key question to answer when you decide to take the plunge and start your own business because your decision can have major implications.

And even after making a choice, with your business firmly established, every once in a while, you should crunch the numbers to work out whether the legal form you chose is still the right one for you and your business, whether that’s sole trader or limited company.

Sole trader v limited company: what’s more common?

• When people “go self-employed” or start their own business in the UK, most become sole traders. It’s by far the most popular small business legal structure. Sole traders make up more than half (56%) of the UK’s 5.5m small-business population, which amounts to about 3.2m businesses.
• In addition, there are some 384,000 (7%) ordinary/general business partnerships, which (tax-wise) is like being a sole trader, but you run a business and share responsibility with a partner or partners.
• Others choose to “incorporate” (ie register) a private limited company and there are about two million (37%) of them in the UK.
• Whether you become a sole trader, ordinary business partnership member or set up a limited company, it’s remarkably quick, easy and no cost or low cost. All can be done online via the government website GOV.UK.

Sole trader v limited company: personal financial risk

A major reason why people set up a limited company concerns personal financial risk. As the name suggests, your personal financial liability is limited, provided that you don’t trade recklessly or fraudulently or give personal guarantees for company loans. That’s because, in law, the limited company is a separate legal entity to its director(s).

The opposite is true for sole trader businesses. In law, there’s no distinction between you and your sole trader business, so you are personally liable for your business debts. That liability is unlimited, which can mean you’re forced to sell off things you own to pay off your business debts, including your car and home. This is less of a consideration if your business is unlikely to build up considerable debts.

Sole trader v limited company: customers and staff

Will potential or existing customers care if you run a sole trader business or limited company. Probably not, because being a limited company is no guarantee that your business is more stable, reliable or superior in any way. And being a sole trader is unlikely to prevent you from being able to tender for contracts, either.

Just because you set up your business on your own, doesn’t mean you’ll have to work on your own. Sole traders can employ others and many won’t care whether you’re a limited company or sole trader, because it has no bearing over how much you pay them or how you’ll treat them.

Sole trader v limited company: finance and tax admin

In many cases, accessing finance and funding won’t be any easier because you run a limited company rather than a sole trader business. Having a sound business plan can be much more important.

Running a limited company involves much more tax admin when compared to running a sole trader business, which is far simpler. You may be able to do some yourself, although with limited company admin, there’s more of it and it’s much more complicated.

You could pay an accountant to take care of your tax admin, of course, but if you’re operating a limited company, your fees are likely to be significantly higher, because an accountant will need to do more work for you. To save money, many sole traders do all of their own tax admin, including completing and filing their own tax returns, which is made much easier by technology.

How are sole traders and limited companies taxed?

As a sole trader, you’re taxed on your net profits (ie actual profit once all costs have been deducted). HMRC allows you to deduct many expenses and costs from your sole trader income and once any tax allowances have been accounted for and your other taxable income factored in, HMRC will tell you how much tax you owe.

You provide summaries of your sole trader income and expenses to HMRC via your SA100 tax return and SA103 supplementary page (hence “Self Assessment”).

You’re taxed according to the Income Tax band into which your total taxable income falls. You do not pay Income Tax on your first £12,570 of gross (ie total) taxable income, because this is your tax-free Personal Allowance. Thereafter:

• you’ll pay the basic rate of Income Tax (20%) if your total taxable income is between £12,571 and £50,270
• the higher rate of Income Tax (40%) if your total taxable income is between £50,271 and £125,140 or
• the additional rate of Income Tax (45%) if your total taxable income is more than £125,140.
• 2023/24 tax year for all figures quoted above. Income Tax bands and rates are slightly different in Scotland.

The Personal Allowance decreases by £1 for every £2 of net income over £100,000 and if your net income is £125,140 or more, you don’t get any Personal Allowance. If you don’t claim any allowable expenses, you can claim the £1,000 tax-free Trading Allowance.

Limited companies pay Corporation Tax on their profits (19% for 2023/24 tax year), while Income Tax and National Insurance contributions (NICs) may be payable on salary the limited company pays you, with tax also payable on share dividend payments that you receive (8.75% if you’re a basic Income Tax payer; 33.75% if you’re a higher rate Income Tax payer; and 39.35% if you’re an additional rate Income Tax payer – all get a £1,000 tax-free Dividend Allowance).

Sole trader v limited company: which is more tax-efficient?

There’s a popular perception that operating as a limited company means you’ll pay less tax than if you were a sole trader. In some cases, with certain amounts of taxable profit, it’s true – but certainly not in all cases. And tax changes introduced in April 2023 mean the tax advantages of limited company structure are significantly less than they were.

Let’s look at some examples, to compare your take-home if you were a sole trader against your take-home as the sole director of a limited company.

  Sole Trader     Ltd Company     Outcome

You take-home £118 more as a sole trader     

You take home £464 more as a Ltd Co Director   

You take home £756 more as a Ltd Co Director

You take home £174 more as a sole trader 

You take home £1,470 more as a sole trader

You take-home £3,154 more as a sole trader   

*All figures calculated by GoSimpleTax, based on 2023/24 tax year figures, and one limited company director taking £9,100 a year as salary and the rest as share dividends, to minimise their tax liability.

At the lower and higher end of the profit scale, operating a sole trader could give you a greater take-home, while you could also save money by doing your own tax admin.

However, even where your take-home as a company director is higher, much if not all of that can be wiped out if you have to pay an accountant to take care of your company and personal tax admin. Your monthly fee to an accountant could be, say, between £60 and £120 or more a month (ie £720 up to £1,440 or more a year), so operating as a limited company could in fact be less tax-efficient, not more.

How to switch from limited company to sole trader

It’s reasonably simple to change from a limited company to sole trader. You can either close down the limited company completely or make it dormant (ie the company still exists but doesn’t trade or receive income from other sources).

• To close a limited company, usually you need the agreement of its directors and shareholders (easy if it’s just you).
• If your company is “solvent” (ie has enough cash to pay its bills/debts), you fill out the DS01 form to apply to Companies House to get the company struck off the Register of Companies (£8 fee for online filing) or you can action a members’ voluntary liquidation. Your company accounts and tax returns must be up to date.
• When you liquidate a company, its assets are used to pay any debts. Any money left goes to shareholders.
• If the company is insolvent (ie can’t pay its bills/debts), you’ll need to liquidate it or apply for a company voluntary arrangement, so you can pay creditors over an agreed fixed period. Visit government website GOV.UK for more information about closing a limited company.
• With the company now closed down or dormant, all you’ll need to do is to register as a sole trader for Self Assessment.

You’re probably reading this because you’ve recently become self-employed or it’s something that you’re considering. Self-employment can provide greater flexibility, more control over your work, a higher income and greater satisfaction. But a key consideration is what taxes you must pay.

In this guide you’ll learn:

• What taxes sole traders pay.
• What expenses you can claim to reduce your tax bill.
• What taxes are payable if you set up a limited company.
• Whether you must register for VAT.
• When Capital Gains Tax is payable.

Self-employment: a popular choice 

Self-employment remains hugely popular. Sole proprietorships (ie sole trader businesses) are the UK’s most common legal business structure. According to government figures, at the start of 2022, out of the UK’s 5.5m total business population, 3.1m were sole proprietorships (56%), 2.1m were limited companies (37%) and 353,000 were ordinary partnerships (6%).

Did you know? Whether a sole trader or working for a limited company that they set up, there are 4.1m “solo self-employed workers” in the UK and they contribute £278bn a year to the UK economy.

Sole trader v limited company

When people decide to become self-employed, usually they either register as a sole trader (most people’s choice) or register a private limited company, for which they work. There are pros and cons to both, but personal financial liability is a key consideration.

• When you’re a sole trader, you and your business are the same thing in law, so, you’re liable for your business’s debts.
• With a limited company, you’re not normally liable for the company’s debts, as it’s a separate legal entity. If it fails, all you stand to lose is the value of your shares and any money you’ve invested, because you have “limited liability”.

If you’ve just gone self-employed or you’re considering it, you’ll want to know how much tax you’ll pay. Before we move to working for a limited company that you set up, let’s look at sole trader taxes.

• Need to know! The UK tax year runs from 6 April until 5 April in the following year.

What taxes do sole traders pay? 

Sole traders pay Income Tax on their taxable business profits – which is turnover (ie total sales or income) less “allowable expenses” (explained further on). Your Income Tax liability is determined by how much you earn above the Personal Allowance and what Income Tax band your taxable income falls into.

• The standard Personal Allowance is £12,570 a year (2022-23 tax year), and you don’t pay any tax until your taxable income is higher.
• The Personal Allowance decreases by £1 for every £2 of net income over income of £100,000. If your net income is £125,140 or more – you don’t get the Personal Allowance.

Now, let’s look at Income Tax bands for 2022-23:

• If your taxable income for the year is between £12,571 and £50,270, it’s taxed at the basic rate of 20%.
• If your taxable income for the year is between £50,271 and £150,000, it’s taxed at the higher rate of 40%.
• If your taxable income for the year is more than £150,000 a year, it’s taxed at the additional rate of 45%.

Need to know! The additional rate Income Tax threshold will decrease from £150,000 to £125,140 from 6 April 2023, affecting some 250,000 UK taxpayers.

Sole Trader National Insurance contributions

• Paying National Insurance contributions (NICs) entitles you to certain benefits and the State Pension.
• You need a National Insurance number before you can start paying your NICs. You’ll find it on old pay slips and your P60.
• As a sole trader, you can pay two types of NIC – Class 2 and Class 4.
• For the 2022/23 tax year, the Class 2 NIC rate is £3.15 a week, payable if your annual profits are more than £6,725.
• For the 2022/23 tax year, Class 4 NICs are payable if your annual profits are more than £11,908. You’ll pay Class 4 NICs of 9.73% until your profits reach £50,270, then you pay a reduced rate of 2.73% on profits above this threshold.

Need to know! If your sole trader profits are less than £6,725 a year, you can pay voluntary Class 2 NICs so that there aren’t any gaps in your National Insurance record and your benefits entitlement isn’t affected.

Income Tax allowances

The first £1,000 of income you earn from self-employment can be claimed as your tax-free ‘trading allowance’, in addition to your personal allowance, to reduce your tax bill.

If you claim the trading allowance, you can’t claim “allowable expenses” (see below). So, don’t claim the trading allowance if your sole trader business tax expenses are more than £1,000 a year. If you’re a sole trader and rent out land or property, you can also claim the £1,000 tax-free property allowance (as can others with whom you own land or property).

If you’re blind, you can claim the Blind Person’s Allowance (BPA), which is an additional tax-free allowance worth £2,600 a year (2022/23 tax year). If you and your spouse/civil partner are both blind, you can both claim BPA. The Blind Person’s Allowance can be transferred between spouses and civil partners if either does not pay tax or earn enough to use all of their allowance.

• Top tip! If you’re married or in a civil partnership and your spouse or partner earns less than the Personal Allowance a year (ie £12,570), via the Marriage Allowance, they can transfer £1,260 of their Personal Allowance to you, which could reduce your tax bill by up to £252 in the tax year (6 April to 5 April). Visit the government website UK for more information.

What sole trader allowable expenses can you claim?

“Allowable expenses” are costs that HMRC allows sole traders to claim as tax expenses to reduce their tax bill. Allowable expenses must be generated “wholly and exclusively” for business reasons – personal expenses are not allowable and trying to claim for them can have serious consequences.

• Need to know! If you use something for business and personal reasons, your mobile phone, for example, you must reliably work out the business-cost proportion and claim only for that amount.

The cost of buying stock or materials are allowable expenses, as are payments to subcontractors, agencies, freelancers, etc, if you employ others (sole traders can employ others).

If you run your freelancer business from home, allowable expenses can include a proportion of your rent or mortgage interest if you’re buying, as well as some of your council tax, water rates, electricity, gas and insurance. You can also claim for business telephone, mobile and broadband costs, as well as postage, stationery, printing, small office equipment and computer software/ink cartridges.

• Need to know! If you use cash basis accounting, where you only record income or expenses when you receive money or pay a bill, the cost of equipment and tools can be claimed as an allowable expense. If you use traditional accounting, where you record income and expenses by the date you invoiced or billed, you should claim capital allowances for such costs.

If you work from commercial premises you can claim for all business costs, including insurance and security, as well as equipment repairs and maintenance. Advertising and marketing costs can also be claimed as an allowable expense, as well as trade or professional journals, trade body or professional organisation membership. Accountancy fees and other professional fees can be claimed as long as they relate to the business. Allowable business expenses can also be claimed for staff uniforms and protective clothing.

What about vehicles, travel and accommodation?

If you buy a vehicle for business, you claim it as a capital allowance, but allowable expenses can include vehicle insurance, repairs and servicing, fuel (business use only), vehicle-hire charges, vehicle licence fees and breakdown cover. You can also claim for parking, train, bus, air and taxi fares, hotel room costs and meals for overnight business trips.

• Need to know! Any parking or speeding fines must come out of your own pocket, as they’re not allowable. And you cannot claim allowable expenses for fuel or mileage for travel between your home and your normal place of work. You’ll also need to buy your own lunch each day, as this isn’t allowable.

How sole traders pay Income Tax and NICs

• Need to know! Sole traders must maintain accurate financial records, detailing all sums entering and leaving their business. HMRC can ask to see your financial records and proof of your business expenses (ie receipts and invoices). You must keep both for at least five years after the 31 January online-submission deadline of the relevant tax year.

You pay your Income Tax and NICs via Self Assessment, the system UK tax authority HMRC uses to collect both taxes. Each year you’ll need to submit a Self Assessment tax return (SA100 form) and the SA103 supplementary pages, summarising your income and business costs, so that HMRC can work out how much Income Tax and National Insurance you owe (HMRC will write to you to let you know). Every year, the annual online-filing deadline for Self Assessment tax returns is midnight on the 31 January. There are financial penalties for filing your tax return late and not paying your tax bill when due (see GOV.UK for more).

To file your tax return, you’ll need to register for Self Assessment. It’s quick and easy and you can do it online via GOV.UK. You’ll need to register again if you did not send a tax return last tax year, even if you’ve sent one previously.

• Need to know! Although it’s better to do it sooner rather than later, you must register for Self Assessment by 5 October in your sole trader business’s second tax year. You may be fined if you don’t.

What taxes do limited companies pay?

• Limited companies must maintain detailed accounting records and each year they must file company accounts, summarising all sums received and paid out.
• After their running costs are deducted and any tax allowances and tax reliefs accounted for, they must pay Corporation Tax on their profits.
• From April 2023, the main rate of Corporation Tax will rise from 19% to 25%. The current 19% rate will still apply where company profits are less than £50,000. The full 25% rate applies to limited companies with annual profits of £250,000 or more. Between these two rates, marginal tax relief will apply; the higher the profit, the greater the Corporation Tax payable.

How would your income be taxed?

If you set up a limited company, you become an employee of that company, which means you’re liable for Income Tax on your salary (as per the bands stated previously) via the company’s Pay As You Earn Scheme (you must register as an employer, even if you’re the only employee, and set up your payroll).

You could pay yourself all of your income that way, but it’s not the most tax-efficient option. What many self-employed people who work for a limited company they’ve registered do is:

• Pay themselves a salary of at least £6,396 (the Lower Earnings Limit for the 2022/23 tax year), so that they pay NICs that entitle them to the state pension and other benefits.
• You can pay yourself a salary of up to £12,570 a year, which means you don’t go over your Personal Allowance, which means no Income Tax is payable, although you will need to pay NICs.
• The rest of their take-home comes from regular company share dividend payments, which are subject to tax, once you earn more than your Personal Allowance, while you also get a dividend allowance, but from 6 April 2023, this will decrease from £2,000 to £1,000 a year.
• The amount of tax you pay on dividends above the dividend allowance depends on your Income Tax band. If you’re in the basic rate band you pay 8.75%. If you’re in the higher rate band, you pay 33.75%. If you’re in the additional rate band, you’ll pay 39.35%.

Need to know! Being self-employed by working for a limited company that you register is far less tax-efficient than it used to be, which is something to consider when starting your business. If your company profit is, say, £25,000 a year, running a limited company rather than sole trader business may offer a tax saving of £360 a year. But you might pay out more to have an accountant take care of your Limited Company tax admin and payroll. Crunch the numbers before deciding your legal business structure.

What about VAT?

Whether you’re a sole trader or run a limited company, you must register for VAT (Value Added Tax) if your VAT-taxable turnover is more than £85,000 a year (2022-23 tax year). Then you can charge VAT to your customers and reclaim any VAT you pay for things your business buys. The VAT you pay to HMRC is the difference between any VAT you’ve paid and the VAT you’ve charged. If you’ve paid more VAT than you’ve charged, HMRC repays you the difference.

Top Tip! You can register for VAT if your turnover is less than £85,000 a year. This can be a tax-efficient option if many of the things your business or company buys is subject to VAT. That said, it involves additional tax admin, especially now it’s subject to Making Tax Digital for VAT requirements.

What about Capital Gains Tax?

Sole traders may need to pay Capital Gains Tax (CGT) if their business make a gain (ie profit) when they “dispose of” (ie sell) all or some of a business asset, which can include land, buildings, fixtures and fittings, plant and machinery, shares, registered trademarks and even goodwill (ie your business’s reputation).

You pay tax on the gain, not the sale price. As well as the CGT tax-free allowance (currently £12,300 for 2022/23 tax year, reducing to £6,000 for 2023/24), Capital Gains Tax reliefs can be claimed to reduce your tax liability. More CGT is payable on gains from residential property when compared to other assets. Your Income Tax band will also determine the amount of CGT that you pay (it ranges from 10%-28%). Visit GOV.UK for more information about CGT.

The term “side hustle” was first used in 1950s America. Although “hustle” suggests something illegal (originally hustle meant to swindle someone), it referred to ordinary people doing legal things to earn a few extra bucks.

Its meaning remains the same and side hustle has become a much more common term in the UK in recent years. Indeed, at times it seemed everyone was supplementing their main income by selling homemade greetings cards, cuddly toys, cakes and other things face to face or via  their own website, Facebook, eBay, Amazon or Etsy. Many people have successfully turned their hobby or passion into a money-spinning side hustle.

Important side hustle tax questions answered

Running a side hustle (or “side gig”) has become much easier and cheaper thanks to technology. Many people now run “dropshipping” side hustles, selling various products online to customers near and far without them having to store any stock. Side hustles can also provide the perfect opportunity to limit risk by trying out a business idea before you pack in your job and do it full time.

If you’re running your own side hustle or you’re thinking about it, tax is a key consideration. Whether innocently or otherwise, not paying tax on your side-hustle income can land you in hot water with HMRC (the UK tax authority). Although tailored tax advice from a trusted source is advised, this guide provides answers to key questions about paying tax on side hustle income.

Is your side hustle income taxable?

If you’ve simply sold off unwanted possessions online or via a local car boot sale, you won’t have to pay tax. They were personal possessions, it’s an occasional thing and you’re making relatively little profit. The same is true if, for example, you sell off your kids’ old toys on Facebook or your own pre-loved clothes via Vinted.

However, if you’re buying raw materials to make things to sell regularly or you’re buying stock to sell to customers, you’re trading and earning money from self-employment. This can be subject to Income Tax if your gross income (ie the total amount you make in sales) is more than £1,000. The “trading allowance” allows you to earn up to £1,000 of trading income tax-free.

If you’re trading, whether you’re making money from your hobby, selling things face to face or online – or selling services, such as babysitting, dog-walking, cleaning gutters, providing guitar lessons or you’re a paid tour guide at weekends – once your gross annual income is more than £1,000 it can be subject to Income Tax, dependent on how much other taxable income you earn. Some people rent out their driveways for parking near to football stadia, which can also be taxable if it’s more than £1,000 a year.

Need to know! Government website GOV.uk features an online tool that enables you to enter details to find out whether you need to tell HMRC about additional income.

What about freelancing or a second part-time job?

• If you freelance to supplement your main wage and earn more than £1,000 in gross income a year, you must report it to HMRC and pay tax on it, if your total taxable income goes over the Personal Allowance (£12,570 for the 2023/24 tax year).

• As regards second jobs, for example, if you work in a pub at weekends, as a part-time employee, you’ll likely be paid through the staff payroll and taxed accordingly, after supplying your tax code. You personally won’t need to submit a tax return to HMRC. However, you’ll need to report any tips you receive, because they can also be taxable income.

Do I need to register my side hustle?

If your gross trading income is more than £1,000 a year and you’ve never registered before, you must register for Self Assessment (unless you register and run your side hustle as a limited company, which is less popular and brings different rules and responsibilities).

After registering for Self Assessment, you’ll be sent your Unique Taxpayer Reference (UTR). And to submit your Self Assessment tax return online, you’ll need to set up a Government Gateway account (the letter from HMRC stating your UTR will tell you how). Once you’ve set up the account, you’ll get an activation code in the post.

When you register for Self Assessment, you’re letting HMRC know that you’re earning additional taxable income. If you haven’t registered for Self Assessment previously, you must do so before 5 October in your business’s second tax year, otherwise HMRC could fine you. The UK tax year runs from 6 April until the following 5 April.

Need to know! If you’ve submitted Self Assessment tax returns previously, you’ll need your old UTR to register and set up your new account.

How much tax is payable on my side hustle?

You pay tax based on your net profits, which is lower than your gross income (ie total sales revenue). Tax expenses that you claim are deducted from your side hustle income and once any tax allowances have been accounted for and your other taxable income factored in (which can include wages from employment), HMRC will work out your tax bill. You must provide all of these figures to HMRC via your tax return (which is why it’s called “Self Assessment”).

You’re taxed according to the Income Tax band into which you fall once your total taxable income has been worked out. The Income Tax band tax rates for the 2023/24 tax year are as follows:

The Personal Allowance decreases by £1 for every £2 of net income over £100,000 and if your net income is £125,140 or more, you don’t get the Personal Allowance. Income Tax bands and rates are different in Scotland.

Need to know! Side hustlers earning more than £12,570 a year must also pay Class 2 National Insurance contributions (NICs) of £3.45 a week (if over £6,725 and below £12,570 you don’t need to pay, but you’ll still receive the benefits that come from paying Class 2 NICs. Class 4 NICs of 9% are payable on profits between £12,570 and £50,270, with 2% payable on profits over £50,270 (*2023/24 tax year for all figures).

Can I claim any side hustle tax expenses?

To help lower your tax bill, potentially, you can claim for a wide range of tax expenses, which are legitimate costs that you pay to start and run your side hustle. You summarise these within your annual Self Assessment tax return. Depending on what side hustle you’re running and providing they are for legitimate business use, allowable expenses can include:

• raw materials or stock
• printing and packaging
• phone use and broadband
• fuel, parking, train or bus fares
• premises costs (eg rent, heating, lighting, business rates, etc)
• office stationery and postage
• advertising and marketing costs
• insurance and bank charges
• accounting and solicitor fees
• training and professional membership fees
• wages paid to others who work for you.

If you use something for your side hustle and personal reasons (eg a mobile phone), you can only claim allowable expenses for the business-cost proportion. You must use a reliable method to work out such costs and HMRC can ask you for proof of any allowable expense that you claim.

If you run a home-based side hustle, you may be able to claim for a proportion of your heating, electricity and water costs, Council Tax, mortgage interest or rent, broadband and telephone use.

• If you use traditional accounting (ie you record income and expenses by the date you invoiced or were billed), you claim capital allowances when you buy equipment, machinery or a car, van or lorry for your side hustle.

• If you use cash basis accounting (ie you only record income and costs in your accounts when you are paid or pay money out) and buy a car for your business, you can claim this as a capital allowance, but everything else must be claimed as an allowable expense.

Rather than working out your business expenses, you can claim flat-rate simplified expenses for vehicle use and working from home. You can’t claim any tax expenses or capital allowances if you claim the £1,000 tax-free Trading Allowance.

Need to know! Many expenses are not allowable for tax purposes, including entertaining customers, travel costs to and from your normal place of work, parking and speeding fines, a business suit, daily meal deal, etc.

What side hustle tax records must I keep?

Because you’re running a business, you must keep accurate, up-to-date records of your sales and expenses, detailing amounts and dates. If you grant credit, you should retain copies of all invoices you send out, as well as receipts and invoices for things you claim as tax expenses. Keep a detailed mileage log if you plan to claim for fuel costs.

Need to know! If your records are not accurate, complete and legible, HMRC can charge you a penalty, which can also apply if your Self Assessment tax return isn’t accurate. You must keep your records for at least five years after the 31 January online tax return deadline for each tax year.

Do I need to register for VAT?

• You must register for VAT if your total VAT-taxable turnover (ie sales or income that is subject to VAT) for the past 12 months was more than £85,000 (the VAT threshold for 2023/24) or you expect your VAT-taxable turnover to go over £85,000 in the next 30 days.
• You can choose to register voluntarily for VAT if your turnover is less than £85,000, which can be worthwhile if you’re paying a lot of VAT on the things you buy for your business.
• If you’re registered for VAT you must add the right amount of VAT to the price of all goods or services you sell; keep records of how much VAT you pay for things you buy; account for VAT for goods you import; digitally report the amount of VAT you charged and paid each quarter; pay any VAT you owe to HMRC.
• You cannot charge VAT unless you are VAT registered.

How do I report my taxable side hustle income?

You must complete and file a Self Assessment tax return (the SA100) each year, summarising your other taxable income, expenses, allowances, pension payments and benefits (if applicable). You must also complete and file the supplementary tax return page SA103, summarising your side-hustle income, tax expenses and any allowances.

After you’ve registered, you can file your tax return any time after the tax year finishes on 5 April, although the annual deadline for filing your Self Assessment tax return online, which is what most people do, is midnight on 31 January. If you miss the filing deadline, a £100 fine is payable immediately. Once HMRC receives your tax return, they’ll work out your tax bill and let you know how much you owe.

The deadlines for paying your tax bill are:

• 31 January for any tax you owe for the previous tax year (this is called a “balancing payment”) and your first “payment on account” (an advance payment towards your tax bill) and
• 31 July for your second payment on account.
• Should you prefer, by arrangement with HMRC, you can make weekly or monthly payments towards your bill.

Need to know! If you don’t pay income tax on your taxable side hustle income and HMRC finds out, you could be faced with a hefty fine. Late tax payments can also result in fines and interest, so the longer you delay paying your tax bill, the more you’ll owe HMRC.

HMRC has advised that for the 21/22 tax year, 385,000 taxpayers filed paper Self Assessment tax returns. If your clients were one of them, this could affect them, as HMRC is currently writing to taxpayers to inform them they will not automatically receive a tax return form for 22/23. Letters are currently being sent out between 23^rd March and 4^th April 2023.

This is a step in pushing taxpayers to file online as part of the government’s objective to have everyone interacting digitally with HMRC and other government bodies.

Who will receive a letter?

135,000 taxpayers who normally file their Self Assessment tax return on paper will receive a letter from HMRC, which will advise them they won’t receive a tax return form automatically this year. Instead, they will be asked to file their return online via gov.uk or by using commercial software.

The digital future

HMRC has a target over the next two years to reduce the volume of letters and forms it sends out via paper. It will continue to persuade taxpayers to use its digital channels where possible which is usually quicker and easier than communicating via post or over the phone.

What if you cannot file online?

Should you not have internet access you are advised to contact HMRC on 0300 200 3610 where you can request a paper form to be sent to you.

Taxpayers aged over 70, who are not already filing digitally and who do not have a tax agent appointed will continue to automatically receive a paper tax return form. Likewise, those who are not digitally capable, such as disabled employers who may employ personal assistants and carers – in these circumstances they will be able to choose to communicate with HMRC non-digitally.

There are other exclusions and special cases from online filing, listed on gov.uk, in which the taxpayer can use digital software to print the form in a format acceptable to HMRC.

Ready to step into the digital era? GoSimpleTax are here to help on your way.

In December 2022, the government announced its decision to delay introducing Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) for two more years until April 2026.

The government says it has done so because it understands that the UK’s 3.1m sole traders (aka the “self-employed”) and its 2.66m private residential landlords are “currently facing a challenging economic environment, and the transition to Making Tax Digital for Income Tax Self Assessment [MTD for ITSA] represents a significant change [for] taxpayers and HMRC for how self-employment and property income is reported.”

The delay has been welcomed by business groups and professional tax and accountancy bodies, reportedly with both voluntary sign up to the Making Tax Digital for Income Tax Self Assessment pilot scheme and awareness of MTD for ITSA among UK sole traders and landlords very low.

Latest MTD for ITSA changes

As well as the two-year delay in introducing the first phase of Making Tax Digital for Income Tax Self Assessment, the government has also increased the MTD for ITSA taxable income threshold. This means MTD for ITSA will impact far fewer Income Tax payers when first introduced, while many others won’t have to comply with Making Tax Digital for Income Tax Self Assessment requirements for some years yet.

Making Tax Digital for Income Tax Self Assessment changes that were planned for introduction in April 2024 would previously have affected sole traders and landlords with taxable income of more than £10,000 a year.

However, from April 2026, only sole traders and UK landlords with taxable income of more than £50,000 in a tax year will be mandated to maintain digital records of their income and costs and provide quarterly summary updates to HMRC using MTD-compatible software (or MTD bridging software that enables them to carry on using their existing accounting software).

Sole traders and landlords with a taxable income of £30,000-£50,000 will need to comply with Making Tax Digital for Income Tax Self Assessment requirements from April 2027 (unless more changes are made).

What if your taxable income is below £30,000 a year?

In December the government also announced plans to conduct a review into the recording and reporting needs of smaller businesses with taxable income of less than £30,000 a year, which will include a large proportion of UK sole traders.

The government says it wants to find out how MTD for ITSA can be made more suitable for smaller businesses and enable them to more easily manage their Income Tax obligations. The government says this review will inform further stages of MTD for ITSA’s introduction after April 2027.

Whether private residential landlords with taxable income below £30,000 a year will need to comply with MTD for ITSA rules before sole traders isn’t clear. However, the planned extension of MTD for ITSA to include members of ordinary business partnerships in 2025 has been scrapped, although no new date has yet been announced.

MTD for ITSA recording and reporting requirements

• Under MTD for ITSA requirements, sole traders and landlords must maintain digital records of their income and costs and digitally send a quarterly summary to HMRC using MTD-compatible software. They can use bridging software that enables them to comply with MTD reporting requirements while using their existing accounting software (including basic spreadsheets).
• They’ll then get an estimated tax bill, based on the information they’ve provided. HMRC believes this will enable sole traders and landlords to better budget to pay their Income Tax tax bills when required.
• At the end of the year, sole traders and landlords must digitally submit a statement to HMRC, confirming the figures they’ve submitted, with any accounting adjustments made.
• They must also make a final declaration, confirming any other income received. They won’t need to file a Self Assessment tax return if they don’t have any other taxable income to report. HMRC will then tell the sole trader or landlord how much tax they owe, which they must pay by 31 January in the following tax year.

Pilot paused for newcomers

In addition to the delay HMRC has now paused access to the pilot scheme for anyone wishing to try MTD for ITSA ahead of the compulsory date whilst they refresh their testing strategy. They will, of course, release updates in the future of any changes to the pilot and how to get involved.

So, your clients gone self-employed in the past year or so and needs to report taxable  income via Self Assessment? Great. Only problem is – they haven’t completed a Self Assessment tax return before. Gulp.

In truth, with a bit of knowledge, completing a Self Assessment tax return is nothing to worry about. Each year, more than 12.2m Self Assessment tax returns are filed by people from a wide range of backgrounds – people just like your clients.

However, passing some basic knowledge to them about how completing their Self Assessment tax return is simple enough and certainly nothing to worry about really (as long as you don’t leave it too late) will help. Here are 21 things your client may need to know, that will ease the strain for you as you work together to complete their return…

Register for Self Assessment

1 To pay Income Tax and National Insurance contributions (NICs), self-employed people (AKA sole traders) must register for Self Assessment. Self Assessment is the system that the government and the UK tax authority HMRC use to collect Income Tax

2 You can register for Self Assessment via government website GOV.uk You must register for Self Assessment by 5 October in your second trading tax year (the tax year runs from 6 April to 5 April), you could be fined if you don’t. Do it sooner rather than later.

3 You’ll need a Government Gateway user ID and password to sign into your business tax account to complete your Self Assessment tax return. If you don’t have one, getting a user ID via GOV.uk is simple enough.

Need to know! After registering online, within 10 days (21 if you live overseas), you’ll get a letter through the post with your Unique Taxpayer Reference (UTR) number. You need your UTR to file your Self Assessment return.

Filing your Self Assessment tax return

4 You can complete and file your Self assessment tax return as soon as the tax year ends on 5 April. It’s best to get it done and dusted long before the online filing deadline, which is midnight on the 31 January.

Need to know! Should you choose to download and fill out a paper tax return – something that only about 4% of people still do – the filing deadline is 31 October. Filing online is much quicker, easier and more convenient, with mistakes much less likely, too, if you use reliable third-party software.

5 You’ll probably have to pay a penalty and interest if you do not file your Self Assessment tax return and pay any tax you owe when required.

6 Once registered, if you choose to file online (as more than 95% of people do) you can file directly with HMRC via Government Gateway or you can use third-party commercial software (which can save you time and money).

7 Using Self Assessment software can ensure that you enter all of the necessary information in the right places. Automatic prompts prevent mistakes and can minimise your tax bill by helping you to claim all of the tax allowances and reliefs to which you’re entitled.

Need to know! If you decide to file online but miss the midnight 31 January deadline and don’t have a reasonable excuse, you’ll be charged a £100 penalty. Your fine will increase if you still haven’t filed after three months.

The Self Assessment tax return

8 Self-employed individuals need to complete the main Self Assessment tax return (SA100) as well as a supplementary page (SA103S or SA103F), summarising their taxable self-employed income and costs.

9 You use the SA103S if your annual business turnover was below the VAT threshold in the tax year (£85k for the 2022/23) and you use SA103F if your turnover was higher.

10 You may need to complete and file other supplementary pages if you have other taxable income to report, for example, SA105 if you also earn taxable income from renting out UK property.

11 Within the SA100, you provide details of taxable income and any capital gains, as well as student loan repayments (if applicable), taxable bank or building society interest, pension payments, annuities, donations to charity and tax reliefs and allowances that you wish to claim.

Self Assessment allowable expenses

12 Self-employed people can claim for many business costs. Such “allowable expenses” can include: business premises heating, lighting, water; rates; stock and raw materials; travel (ie fuel, parking, train/bus/taxi fares); staff/subcontractor wages; office costs (stationery, phone and broadband); insurance or bank charges; uniforms or safety clothing; marketing/advertising; training; professional fees.

• Visit government website GOV.uk for more information about claiming sole trader allowable expenses.

13 Sole traders who work from home all or some of the time can claim a proportion of their domestic costs for electricity, gas, water, Council Tax, mortgage interest or rent, broadband and telephone use, repairs and maintenance, etc.

14 If you use something for both business and personal reasons, you can only claim allowable expenses for the business cost proportion. You’ll need to use a reliable method to work out how much to claim.

15 Rather than working out your actual business expenses, HMRC allows you to claim flat-rate “simplified expenses” for running your business from home and business travel. Visit GOV.uk to find out more about simplified expenses.

Need to know! If you’re not sure whether a business cost is allowable, contact the Self Assessment helpline. You can’t claim allowable expenses if you claim the £1,000 tax-free trading allowance, which is advised if your expenses are below £1,000.

Completing your Self Assessment tax return

16 According to Which?, on average, it takes about two and a half hours to complete a Self Assessment tax return. And while more experienced people (about 20%) can get it done in less than an hour, it takes as long as five hours for 10% of Self Assessment taxpayers. Some people do it in one session, others do it in two or three.

Top Tip! Before starting, read HMRC’s guidance and help sheets on the SA100 and supplementary pages so that you better understand what information you need to enter.

17 Before you start to fill in your Self Assessment tax return, to help you to complete the task much sooner, have all of the following to hand:

• your ten-digit Unique Taxpayer Reference (UTR)
• your National Insurance number
• details of your income from the tax year (eg income from self-employment, dividend payments, interest, rental income, etc)
• categorised summaries of costs you wish to claim as allowable expenses
• contributions to charity or pensions that might be eligible for tax relief.

Having all of your income and costs neatly summarised already in accounting software really will save you a lot of time when it comes to filling in your Self Assessment tax return.

Top Tip! If you also receive income from part-time or full-time employment, have your P60 to hand. Even though you’ve already paid tax on it, you need to include employed incomes in your SA100, so that your overall tax liability can be calculated.

18 Don’t rush when filling out your Self Assessment tax return, otherwise you’re more likely to make mistakes. Pick a time and a place where you’ll be free from distractions, so you can concentrate fully on the job in hand.

19 You can file your Self Assessment tax return any time after 6 April, so don’t leave it until the week before the online filing deadline (midnight on 31 January). You don’t need that additional stress, right?

20 If you file online but suddenly realise that you’ve made a mistake in your Self Assessment tax return, you’ll have to wait three days (72 hours) to correct it. But you can amend figures up to 12 months after the filing deadline.

How much tax will you pay?

21 Your tax bill will be based on the figures you’ve reported in your Self Assessment tax return and the Income Tax into which your taxable income falls.

• Thanks to the Personal Allowance, you don’t pay any Income Tax on the first £12,570 of your income (providing you don’t earn more than £125,140 in a tax year). This is in addition to other tax reliefs and allowances that you can claim.
• The 20% Basic Rate of Income tax is payable on income between £12,571 and £50,270. The 40% Higher Rate of Income Tax is payable on income between £50,271 and £150,000. The 45% Additional Rate of Income Tax is payable on earnings of more than £150,000 a year (*Income Tax bands are different in Scotland).
• Self-employed sole traders normally pay two types of National Insurance contributions (NICS): Class 2 (£3.15 a week) if your profits are £6,725 or more a year; and Class 4 if your profits are £11,909 or more a year (9.73% on profits between £11,909 and £50,270; 2.73% on profits over £50,270: *2022/23 tax year for all figures quoted).

Need to know! The deadlines for paying your tax bill are 31 January for any tax you owe for the previous tax year (it’s called a “balancing payment”) and your first “payment on account” (advance payments towards your tax bill, including Class 4 NICs if you’re self-employed), then 31 July for your second payment on account.

About 20% of UK adults are reported to own cryptocurrency, with almost 45% of them having invested in the past year or two. Buying crypto accelerated during the pandemic, with UK ownership levels now similar to Germany, Ireland and other European countries.

Most UK crypto investors live in London. Research suggests that almost a quarter live in the capital, with 12% living in England’s North West and 11% in both the South of England and East Anglia. The average crypto investor is in their mid-30s and most people buy cryptocurrency as a medium- to long-term investment, not as a way to try to make quick returns.

If you’re a recent crypto investor or you’re considering becoming one soon, read on to find out:

• When Capital Gains Tax is payable on crypto.
• When Income Tax is payable on cryptocurrency.
• What cryptocurrency records investors must keep.
• How HMRC can investigate your crypto assets.

When is Capital Gains Tax payable on crypto currency?

In most cases, Capital Gains Tax is payable on cryptocurrency, not Income Tax. Obviously, people invest in cryptocurrency hoping its value as an asset will increase over time. So, like other assets, Capital Gains Tax can be payable if you sell your cryptocurrency tokens, exchange them for other crypto assets, use them to pay for goods or services or give them away (unless you give them to your spouse or partner).

The taxable gain is the difference between how much the cryptocurrency was worth when you bought it and its value on disposal. If your total taxable gains are above the Capital Gains Tax tax-free allowance threshold (£12,300 for the 2022/23 tax year), you’re taxed according to your Income Tax band.

• If you’re a basic rate Income Tax payer (ie with yearly taxable earnings of £12,571-£50,270) you’ll pay Capital Gains Tax of 10% on crypto gains over the CGT allowance.
• Higher or additional rate Income Tax payers (ie with taxable earnings of more than £50,270 a year) pay 20% CGT on their crypto gains, once over the CGT allowance (£12,300).

Need to know! To check if you need to pay Capital Gains Tax, you must calculate your gain for each transaction (the rules are different if you sell crypto tokens within 30 days of buying them).

Crypto CGT allowable expenses

Some crypto expenses can be deducted for Capital Gains Tax. According to HMRC, such allowable expenses include:

• transaction fees paid before the transaction is added to a blockchain
• advertising for a cryptocurrency buyer or seller
• drawing up a crypto transaction contract
• valuations so that you can work out your gain for a transaction.

According to HMRC, deductible allowable expenses can also include “a proportion of the pooled cost of your tokens when working out your gain”.

What about crypto losses and CGT?

You can report losses on cryptocurrency to HMRC to reduce your total taxable gains. When you report these “allowable losses”, they can be deducted from gains made in the same tax year. Unused losses from previous tax years can be carried forward to reduce current or future CGT liability.

You claim your loss via your Self Assessment tax return. You’re not required to report losses straight away; you have up to four years after the end of the tax year within which you disposed of the asset.

Need to know! You report and pay Capital Gains Tax on cryptocurrency by completing a Self Assessment tax return at the end of the tax year or by using HMRC’s real-time Capital Gains Tax service to report it straight away.

When is Income Tax payable on crypto?

• Income Tax and National Insurance contributions (NICs) can be payable on cryptocurrency if gifted to you as a non-cash bonus/benefit/payment by an employer.
• If HMRC believes you’re engaged in cryptocurrency trading rather than simply being an occasional investor, Income Tax rather than Capital Gains Tax may be payable (both via Self Assessment).
• There can also be Stamp Duty, Inheritance Tax and pension contribution implications.
• You don’t pay Capital Gains Tax on the value of the cryptocurrency if you’ve already paid Income Tax, but you will still need to pay CGT on the gain made after you’ve received the asset if you later dispose of it.

What crypto records might HMRC ask for?

HMRC requires you to keep separate records for each cryptocurrency transaction detailing: token type; date of your disposal; number of tokens disposed of; tokens remaining; value of the tokens in pound sterling; bank statements and wallet addresses; pooled costs before and after you disposed of them.

If it decides to carry out a compliance check, HMRC can ask to see your cryptocurrency records. If you don’t disclose cryptocurrency gains to HMRC it may result in you having to pay tax, interest and penalties.

Need to know! If you’re found guilty of deliberately trying to conceal cryptocurrency income/gains you’re guilty of tax evasion, which can lead to criminal charges.

Does HMRC track crypto?

HMRC can make information requests to crypto exchanges. It has powers to collect data from third parties for use in its compliance activities. Cryptocurrency platforms are obliged to share account information with HMRC and they’re open about doing so. If crypto data is held outside the UK, it might still be accessible via international treaties to which the UK is a party.

“KYC” (“Know Your Customer”) is the term given to a financial institution’s obligation to undertake identity and background checks on potential clients before allowing them to use their product or platform. It’s part of a wider set of measures designed to help combat money laundering. The government believes that “hundreds of millions of pounds are likely laundered via over-the-counter crypto brokers”.

Reportedly, HMRC works with large crypto exchanges to share customer information provided from Know Your Customer (KYC) identification records. In recent years, HMRC is reported to have used this information to send “nudge letters” to crypto investors to remind them of their obligation to report their crypto assets and pay their taxes.

Need to know! If you hold cryptocurrency assets, seek professional advice so that you understand your tax position and ensure that you’re reporting cryptocurrency income/gains as required. HMRC remains determined to identify and punish non-compliance.

Being self-employed doesn’t usually mean getting an easier ride. Days can be long and tiring, because you must take care of many tasks and shoulder all of the responsibility. Many self-employed people become so deeply entrenched in running their business that they rarely step back, take a breath and carefully consider some key factors.

Although you should probably do it more often, once a year you should take time to take stock. January can be ideal for this, after you’ve filed your Self Assessment tax return and had some time off to rest, relax and take a break from your normal day to day. So, what key factors should you consider, at least once a year, if you’re self-employed?

1. Business performance

Sounds obvious, right? But, even when armed with figures from their bookkeeping software or Self Assessment tax return, many sole traders don’t take the opportunity to assess their business performance, which is risky. You should know how your sales, costs and profit compare with the previous years. Are they increasing or decreasing? What are the key reasons for any changes? Are things getting better or worse for your business? Assessing your business performance could enable you to learn valuable lessons and perform better in the next 12 months.

2. Accounting procedures

You can’t run and grow a successful business unless you keep a close eye on your sales, costs and cash flow. That’s only possible if you have a reliable financial record-keeping system, one that you regularly update with accurate figures that reveals, at the touch of a button, your business’s true financial health. Is your accounting system up to the job or is it time to update and upgrade? Do you need to up your game when it comes to keeping your financial records current? Could better technology make accounting easier for you?

3. Business systems

The same applies to your other key business systems, so, ask yourself whether they’re still fit for purpose or do you need to improve or upgrade them. All of your systems should function well, save you time, effort and money, while enabling you to take care of things that are critical to your success, such as managing customer relationships, communication, controlling your costs, generating new sales and organising your work and time. Again, could better technology be a game-changer for you going forward?

4. Tax admin

Do you struggle when it comes to managing tax? Many people do. Does Self Assessment continue to cause you a major headache each January as you battle to file your Self Assessment tax return before the online-filing deadline? Technology can take away much of the pain of managing tax, while you can reach out for support. Crucially, you should ensure that your business is as tax-efficient as possible, of course, which means you’re claiming all of your available allowances and reliefs. The same applies to your own earnings, of course. Seeking tailored tax advice could save you a lot of money.

5. Business banking

How much do you pay in bank charges every month/year? How could you reduce any interest payments and business banking fees/charges? Although changing to another bank is not as easy as it used to be, you might be able to get a cheaper deal from another bank. Once a year, at least, you should compare your current banking deal with others. You should also arrange to speak to someone at your bank (preferably at your local branch) to find out how you could save money and get more from your relationship. And if you’re still using your personal bank account, setting up a separate business bank account is advised.

6. Business plan

Many people produce a business plan when starting up, but most fail to ever update it, which renders it useless. If your business plan is to continue to prove a useful tool that helps you to take your business forward, you must update it every year. Your business and its market may have changed massively as a result of the pandemic or other key factors. Take time to consider whether your business plan goals and strategy need updating or rethinking. Once updated, dig out your business plan, at least every six months, to remind yourself of what you’re aiming to achieve and how. It could help to keep you on the right path. Remember: planning without action is futile, while action without planning can be fatal.

And finally…

Also think about yourself. Does your work still stimulate and satisfy you? Are you happy with your take-home or should you be earning more? Would you like to learn new skills and make your working life more varied? What about your work-life balance – does that need improving? Also consider those close to you and the effect your work has on them. Sometimes small changes can make a big difference.

Going into business with a partner or partners can offer many benefits. You can gain from other people’s talent, ideas, knowledge, skill, contacts and cash, just as they can gain from yours. You can also share the workload, risk and responsibilities, while avoiding feelings of isolation that can happen when running a business on your own.

The UK has some 384,000 ordinary business partnerships, which is about 7% of the total business population. And whether it’s friends, family, partners, spouses or colleagues, many people continue to start and run a business with partners.

Moreover, in recent years, more people are forming partnerships with others to buy and rent out properties they own as private landlords. There can certainly be many advantages to this, whether that’s linked to tax or simply sharing responsibility and risk.

Members of ordinary business partnerships and those who rent out property through a partnership report taxable income via the SA800 Partnerships Tax Return.

In this guide we explain:

• What the SA800 is.
• Who is responsible for completing and filing it.
• Supplementary pages you may have to submit with your SA800.
• SA800 Partnership Tax Return filing deadlines and late-filing penalties.
• When and how you must pay your tax bill.

What is an “SA800”?

An SA800 Partnership Tax Return (usually shortened to “Partnership Tax Return”) is the tax return that members of ordinary partnerships must complete and file to tell HMRC about the partnership’s income and “disposals of chargeable assets” (ie selling an asset).

• You can access the SA800 Partnership Tax Return via government website GOV.uk.

As explained by HMRC in its guidance notes: “Every partnership gets the first eight pages of the Partnership Tax Return covering income from trades and professions, and interest or alternative finance receipts from banks, building societies or deposit takers. There are other ‘supplementary’ pages covering the less common types of income and disposals of chargeable assets.”

• On pages 6 and 7, the SA800 Partnership Tax Return includes a Partnership Statement, which is where profits, losses or income allocated to the partners are summarised. There are two types of Partnership Statement:
• A short version for partnerships with trading or professional income only, or interest or alternative finance receipts from banks, building societies or other deposit takers.
• A full version SA800(PS) covering all types of partnership income.
• The short Partnership Statement caters for up to three partners, while the full Partnership Statement caters for up to six.
• You must also fill in the Partnership Trading pages (pages 2 to 5 of the SA800 Partnership Tax Return) if, at any time in the tax year, the partnership carried out a trade or profession. Some partnerships may need to fill in more than one set of Partnership Trading pages.

Need to know! In addition to the main SA800 tax return, each partner must also file a personal tax return (SA100) and the SA104 supplementary pages to declare their share of any profit or loss. Submitting the SA100 and the SA104 determines how much tax, if any, individual partners must pay. Often this gets missed and results in partners being fined by HMRC. A separate page must be completed for each partnership someone belongs to.

How to register a business partnership

You must register your partnership for Self Assessment with HMRC if you’re the ‘nominated partner’ (the partner responsible for tax and filing the partnership tax return).

You must register before 5 October in your business partnership’s second tax year, otherwise there could be a penalty to pay. The other partners must register themselves separately as a partner. You won’t be able to file an SA800 Partnership Tax Return or a tax return for yourself unless you’re registered.

• Visit government website GOV.uk to register your new partnership.
• If you can’t register online, you can also register using form SA400 (form SA401 to register as a partner), which can be posted to HMRC.

SA800 Partnership Tax Return supplementary pages

Some types of income are taxed differently when earned through a partnership, for example, rental income or income earned from outside of the UK. You must tell HMRC about these in the SA800 and then provide details in supplementary pages. Such sources of income and the supplementary pages used to report them include:

• Self Assessment: Partnership Statement (full) (SA800(PS))

You use supplementary pages SA800(PS) to declare earnings from sources that aren’t trading/professional income.

• Self Assessment: Partnership Trading and Professional Income (SA800)(TP)

You use supplementary pages SA800(TP) to record income from more than one trade or profession on your SA800 Partnership Tax Return.

• Self Assessment: Partnership UK property (SA801)

You use supplementary pages SA801 to record UK property income on your SA800 Partnership Tax Return.

• Self Assessment: Partnership Foreign (SA802)

You use supplementary pages SA802 to complete your SA800 Partnership Tax Return if your partnership generated income from outside of the UK.

• Self Assessment: Partnership disposal of chargeable assets (SA803)

You use supplementary pages SA803 to complete your SA800 Partnership Tax Return if your partnership “disposed of any chargeable assets” (eg stocks, shares, land and buildings, business assets such as goodwill, etc).

• Self Assessment: Partnership savings and investments and other income (SA804)

You use supplementary pages SA804 to record savings, investments and other income on your SA800 Partnership Tax Return.

Responsibility for filling out and filing an SA80

By law, the partner nominated by the other partnership members must complete the SA800 Partnership Tax Return and either send it by post to HMRC or file it online using commercial filing software.

The nominated partner is usually chosen when the partnership is set up, but HMRC can choose someone if no one has been selected. If an SA800 Partnership Tax Return has been issued by HMRC in the name of a specific partner, they’re required by law to complete and file it.

Need to know! When reporting profit or loss, the split must accord with the terms of the partnership agreement. In most cases the share is the same for each partner, although it’s not always the case.

How to file your SA800 Partnership Tax Return

• You can send your completed SA800 Partnership Tax Return and any supplementary pages by post to HMRC.
• Alternatively, most people file their completed SA800 Partnership Tax Return and any supplementary pages online, but you need to buy commercial software to do this. Government website GOV.uk lists commercial tax return software suppliers.

SA800 Partnership Tax Return filing deadlines

• If you file a paper SA800 Partnership Tax Return, you have until midnight 31 October following the end of tax year (5 April) to which the information refers.
• If you file your SA800 Partnership Tax Return online, you have until midnight on 31 January following the end of tax year (5 April) to which the information refers.

SA800 Partnership Tax Return late-filing penalties

If you don’t file your SA800 Partnership Tax Return before the paper or online deadline, whichever one you choose, each member of the partnership during the tax return period must pay a £100 penalty, unless you have a valid reason for being late.

If the partners still fail to file their SA800, each partner will be charged:

• More than three months late – a penalty of £10 per additional day the SA800 Partnership Tax Return is late up to a maximum of 90 days (£900).
• More than six months late – a fixed penalty of £300.
• More than 12 months late – a further fixed penalty of £300.

Need to know! You must complete the Partnership Tax Return in full. If you have a disability that makes filling in the return difficult HMRC can help you complete the form.

What happens after HMRC receives your SA800?

After receiving it, HMRC will process your Partnership Tax Return using the figures you have entered. If there are any obvious mistakes, HMRC will correct them and let you know. HMRC may also contact you if it has any queries over the figures you’ve entered.

HMRC has 12 months from the date of filing to check your SA800 Partnership Tax Return and any supplementary pages. It can ask you to provide accounting figures from which you took the figures you entered in the tax return. These can also be checked against your bank account figures.

All partnership members are responsible for the accuracy of their SA800 Partnership Tax Return. The partnership should retain records of all its business transactions. You must keep these for at least six years and show them to HMRC on request.

SA800: tax payment deadlines

The deadlines for paying your tax bill are:

• 31 January for tax you owe for the previous tax year (called a “balancing payment”) and your first payment on account (ie advance payments towards your tax bill) then
• 31 July for your second payment on account.

Keeping your costs to a minimum is advised when starting a business, because it means you can pay off your start-up costs sooner and then start to make a profit. You also risk losing less money if the business doesn’t get off the ground.

Some sole trader businesses can be launched with little or no money, but in many other cases, starting a new business means having to buy many products and services, and those costs can soon mount up.

Whether it costs a lot or relatively little to start your sole trader business, thankfully, you can claim tax relief for “pre-trading” expenses (AKA “pre-trade” expenses), which can lower your tax bill significantly. Read on to find out:

• What pre-trading expenses are.
• Which pre-trading expenses you can claim.
• How to claim pre-trading expenses.

What are pre-trading expenses?

As the name suggests, pre-trading expenses are costs that result from buying products and services to get your sole trader business ready to start trading. Sole traders usually cover these expenses out of their own pocket when starting their business and it can be easy to forget some of them, so keep a detailed record of all your start-up purchases and expenses, so you can claim them all back.

As long as things are bought “wholly and exclusively” for “the purposes of a trade, profession or vocation” before you start your business then HMRC would class them as “allowable” (ie a legitimate business expense that is subject to tax relief) had your business started trading, you can claim them as if they were an expense incurred on your first day of trading.

Need to know! Tax relief for pre-trading expenses is only available to the person who bought the products or services and who starts the sole trader business.

Which pre-trading expenses can be claimed?

Sole traders can claim a wide range of allowable expenses, including stock/raw materials, rent, mortgage interest repayments, rates, utilities, business insurance, phone and broadband costs, printing, stationery/office costs, bank, loans and credit card charges. Other allowable expenses include advertising, marketing, accountancy/professional fees, vehicle, travel and accommodation costs, as well as safety wear and business-branded clothing.

You may well have needed to pay some of these before registering as self-employed and/or starting your sole trader business, creating pre-trading/trade expenses in the process. For example, you might have bought raw materials to create products to show to potential customers, or you may have had leaflets, brochures or business cards designed and printed. You could have made many phone calls.

Maybe you paid a designer to create a logo for you or you needed to buy a website domain or website subscription. You may have needed to make business-related journeys, using your own vehicle or by public transport, to visit potential customers or suppliers. Potentially, these and many others could be claimed as pre-trading/trade expenses.

Need to know! Visit government website GOV.uk for more information about allowable expenses when running a sole trader business.

When should you claim costs as capital allowances?

• If you use “traditional accounting” methods (ie where you record income and expenses by the date you invoiced or were billed), you claim capital allowances when you buy assets you keep to use in your business, such as equipment, machinery, tools and business vehicles (cars, vans, and lorries).
• If you use “cash basis accounting” methods (ie you only record income or expenses in your accounts after you receive money or pay a bill) and buy a car for your business, you claim this as a capital allowance, but all other assets you buy and keep in your business should be claimed as an allowable expense.

Top tip! If you’re registered for VAT, you may be able to claim back the VAT you’ve paid on pre-trade products and services you’ve bought.

How to claim pre-trade/trading expenses

As with allowable expenses when running a business, you must have proof to support your claim for pre-trading expenses. This usually means an invoice or detailed sales receipt showing what you’ve bought, when and how much you’ve paid. You don’t have to submit these with your Self Assessment tax return, but HMRC can later request evidence of any expense you claim. Fraudulent claims can lead to serious penalties.

Detailing all of your start-up purchases and costs in accounting software or even a simple spreadsheet will make later claiming pre-trading costs much simpler and quicker.

Basically, you claim Income Tax relief for your pre-trade/trading expenses as if they were allowable expenses in your Self Assessment tax return for your first year of trading.

These are deducted, together with any tax allowances to which you’re entitled, before your tax bill for your first year in business is calculated. HMRC will contact you to tell you how much tax you owe.

More than 7.25m UK families receive Child Benefit, which helps to cover some of the living costs of about 12.66m children and young adults. Child Benefit is payable to those who bring up children below the age of 16 or young adults below the age of 20 in approved education or training.

Only one parent or guardian can get Child Benefit, which is paid each month, but there is no limit to how many children you can claim for. For the 2022/23 tax year, you get £21.80 a week for your first child/young adult and £14.45 for each additional child/young adult.

The number of people receiving Child Benefit has fallen since the early 2000s. And according to HMRC, the introduction of the High Income Child Benefit Charge (HICBC) in January 2013 led to a decrease in the number of families claiming Child Benefit, with many opting out because of the tax implications.

In this guide you’ll learn:

• Who must pay the High Income Benefit Charge.
• How the High Income Benefit Charge is paid.
• How to opt out of paying the High Income Benefit Charge.
• What to do if your circumstances change.
• How to reclaim overpaid High Income Benefit Charge.

Who pays the High Income Benefit Charge?

The High Income Child Benefit Charge is payable when you or your spouse/partner’s taxable annual income is more than £50,000 and you receive Child Benefit. It can also be payable if someone else (eg your ex-spouse) receives Child Benefit for a child/young adult living with you and they contribute at least an equal amount towards their living costs.

You don’t need to be the biological parent for High Income Benefit Charge rules to apply. For High Income Benefit Charge purposes, income is your total taxable income before your or your partner’s Personal Allowance or any other allowances (eg Married Couple’s Allowance) are taken into account.

If your income and your partner’s income are each more than £50,000 a year, the person with the higher personal income is responsible for paying the High Income Benefit Charge. “Partner” means someone you’re married to or in a civil partnership with or living with them as if a civil partner.

Do you claim Child Benefit or opt out?

If you or your partner’s taxable, pre-allowance income is more £50,000 a year, you must report Child Benefit you receive and pay tax on it via Self Assessment (the system HMRC uses to collect Income Tax).

Because of the tax implications, you can decide not to claim Child Benefit, in which case you won’t need to report it or pay tax on it. You do this by stating on the Child Benefit claim form that you do not want to receive Child Benefit. You’ll still get National Insurance credits towards your State Pension entitlement, while your child/children will automatically be sent their National Insurance number before they’re 16, which, obviously, they’ll need.

You can decide to claim Child Benefit and later opt out; or opt out and later opt in. You’re not required by law to claim Child Benefit.

How much High Income Child Benefit Charge is payable?

• The High Income Child Benefit Charge is 1% of the amount of child benefit for each £100 of your income, on a sliding scale between £50,000 and £60,000.
• So, for those earning more than £60,000 the charge is 100%, which means they’re no better off by claiming Child Benefit, so they’d be better opting out to save themselves the trouble of having to complete a Self Assessment tax return.

Need to know! Government website GOV.UK features a handy online calculator so you can work out how much Child Benefit you’ll receive in a tax year and how much High Income Child Benefit Charge will be payable.

Paying the High Income Child Benefit Charge 

To pay the High Income Child Benefit Charge, first you’ll need to register for Self Assessment. Then you’ll need to fill in and file a Self Assessment tax return each year. Government website GOV.UK explains how to register for Self Assessment if you’re not self-employed.

If you don’t already send a Self Assessment tax return, you must register by 5 October latest following the end of tax year for which you need to pay the High Income Child Benefit Charge (the UK tax year ends on 5 April). You may be fined if you fail to register when required, while not declaring taxable income from Child Benefit can also lead to financial penalties.

Stopping and starting Child Benefit

Because of the tax implications (eg you receive a significant wage rise), you may decide to stop claiming Child Benefit. To do this, you can fill in an online form (you’ll need your Government Gateway user ID and password when you sign in) or write to or call the Child Benefit Office. You must pay any High Income Child Benefit Charge you owe for the tax year up to the date your Child Benefit stopped.

If your circumstances change and you want to start claiming Child Benefit again (eg your income drops), you do in the same way as detailed above. Payments usually start again within days and you’ll be told whether you’re due any backdated Child Benefit.

If your taxable income changes and it falls below £50,000 for the year, you won’t have to pay the High Income Child Benefit Charge. You can stop or restart your Child Benefit whenever you like. Your High Income Child Benefit Charge liability can change should a former partner move out or a new partner move in (they may be claiming Child Benefit), which is something to bear in mind. To find out about the tax implications you can use the High Income Child Benefit Charge online tool on GOV.UK, before perhaps seeking tailored advice.

Preventing mistakes and limiting your tax liabilities

As already explained, failure to report taxable Child Benefit via Self Assessment, which you may need to register for, can lead to financial penalties. These can be significant if made over a number of years. As well as a fine, expect to pay outstanding tax and interest. Ignorance is no defence.

Not getting your self Assessment tax return in by the filing date can also lead to penalties, although (for a fee) you can get help with yours, while third-party Self Assessment software can make the task much quicker and easier, with mistakes also less likely.

You also need to ensure that tax doesn’t continue to be deducted from your income when you stop claiming Child Benefit, for example, when your son or daughter is above the age of 16 or 20 if in training or education, or they suddenly leave education or training. This is more likely if deductions for the High Income Benefits Charge are made via the payroll of a company you work for. If you suspect that you’ve been paying tax on Child Benefit that you didn’t receive, seek a refund from HMRC.

The UK is facing a serious cost-of-living crisis. It’s being driven by eye-watering utility bill increases, rocketing fuel pump prices and record inflation that’s making the weekly supermarket shop and other purchases far more expensive. Moreover, interest rates are increasing, with more hikes expected, while take-home pay isn’t increasing anywhere near in line with inflation.

Many people are already having to cut back to get by, and that includes the nation’s 3.5m sole traders, the unsung heroes of the economy who make up 59% of the total UK business population (5.9m), as well as the 405,000 people (7%) who run ordinary business partnerships.

Caution is advised when cutting costs, because if you cut them too much or in the wrong places, it can damage your sole trader business. But sole traders can potentially make savings in most if not all areas – and that includes tax. That doesn’t mean doing anything illegal, of course, but just finding ways to minimise your tax bill and limit your tax-management costs. So, how might you save money on tax when you’re self employed?

1. Claim all of your allowable expenses

If you’ve been running your sole trader business for some years, you’ve probably already claimed allowable expenses via your Self Assessment tax returns. These are costs generated “wholly and exclusively” to operate your sole trader business. You deduct these from your income so that you’re taxed solely on your profits.

Do some research to find out whether you’re claiming all of your allowable expenses. Government website GOV.UK is a great starting point to find out more about allowable expenses.

How might you be missing out? If you run your sole trader business from commercial premises or supply services at your customers’ homes, you can claim allowable expenses for operating a small home office for after-hours admin work. Make sure you also claim for all eligible business mileage costs. You might be paying for things which could be claimed as an allowable business expense. Even small expenses such as postage stamps or a daily pint of milk mount up over the year.

2. Make Marriage Allowance work for you

You’re probably already claiming your Personal Allowance of £12,570 a year, which is tax-free income you can earn if your net income is below £100,000. But if you’re married or in a civil partnership, find out about Marriage Allowance. It could reduce how much tax you or your partner pays if you or they are a basic rate Income Tax payer (ie income of £12,571-£50,270 – 2022/23 tax year).

The Marriage Allowance enables a partner who is earning below £12,570 a year to transfer 10% of their Personal Allowance to their higher-earning partner, which equals £1,260 and offers a potential tax saving of up to £252 a year

3. Lower your “payments on account”

Most self-employed people pay their Income Tax in two advance payments, one in January and the other in July, with payments based on the previous year’s tax bill. However, if your earnings for this tax year will be lower, you can reduce your payments via your Government Gateway online account or by sending a completed SA303 form to HMRC. Otherwise, you’ll pay more and have to wait for a refund from HMRC.

4. Get tax relief on your pension contributions

Private pension contributions paid into HMRC-registered private pension schemes are tax-free up to set limits. You’ll only pay tax if the value of your pension pot goes above 100% of your earnings in a year or is more than £40,000 a year.

As explained on the government’s Money Helper website: “If you’re a basic-rate taxpayer, the government will add an extra £25 for every £100 you pay into your pension. If you pay enough tax at the higher rate of 40% in England, Wales or Northern Ireland, you can claim back a further £25 through your tax return for every £100 you pay into your pension. In Scotland, you can claim an extra £1.58 for every £100 paid if you pay enough tax at the Scottish Intermediate Rate of 21% [and] a further £26.58 if you pay enough tax at the Scottish Higher Rate of 41%.”

5. Donate to a charity

They’re not only a great way to make a positive difference, but donations to charities or community amateur sports clubs are also subject to tax relief. Donations made through Gift Aid enable charities to claim an extra 25p for every £1 you give, as long as you make a declaration vis a Gift Aid form. Donations will qualify and long as they’re not more than four times what you’ve paid in Income Tax or Capital Gains in that tax year. If you pay tax above the basic rate of Income Tax, via Self Assessment, you can claim the difference between the rate you pay and basic rate on your donation.

6. Claim for previous tax return mistakes or trade losses

If you’ve made mistakes in tax returns in the past four years, for example, by not claiming for all of your allowable expenses, you may be able to claim a refund for overpaid tax. You write to HMRC to tell them you want to claim overpayment relief. You must include proof that you’ve overpaid tax through Self Assessment and sign a declaration confirming the accuracy of the new details you’ve provided. Obviously, you must not wilfully make invalid claims.

Covid meant that many sole traders made a loss in recent years, with some unable to claim government support. If you’re among them and you haven’t already done so, you may be able to offset a loss against profits made in subsequent years, which will reduce your next tax bill.

7. Do your own Self Assessment tax return

If you’re currently paying an accountant to complete your Self Assessment tax return, doing it yourself could save you a few quid. For a lower price (£50 or so), software can make completing your own Self Assessment tax return cheaper, quicker and easier, with the software providing prompts to help you enter the right figures in the right place. Such software also comes with customer support.

Other ways to save money and pay less tax

Transferring ownership of assets to your spouse or civil partner can shield you from Capital Gains Tax. You do not pay Capital Gains Tax on assets you give or sell to your spouse or civil partner, providing you live together and their business doesn’t sell them. They may have to pay tax on any gain if they later dispose of the asset.

You may also benefit on savings and investments. The Starting Rate for Savings supports savers on the lowest incomes, as you don’t pay tax on up to £5,000 of interest from savings. The Personal Savings Allowance also enables tax-free earnings. Basic rate taxpayers get a £1,000 tax-free allowance, while higher rate taxpayers get £500 (additional rate taxpayers get nothing). Tax-free ISAs (Individual Savings Accounts) could be another option.

If you rent out a spare, furnished room in your home, the Rent-a-Room Scheme enables you to earn up to £7,500 a year in tax-free rent. And under the Tax-Free Childcare scheme, parents can claim back 25% of their childcare costs up to £500 every three months, as long as they earn less than £100,000 a year and the child is under 11. You’ll need to set up an online childcare account, then for every £8 you pay in, the government will pay in £2 that you can use to pay your childcare provider. You can get Tax-Free Childcare and 30 hours free childcare if you’re eligible for both.

A penny saved…

Finding ways to save on tax can take effort, but the results make it worthwhile, with every penny saved a penny earned. Lowering your costs wherever possible increases the chances that you and your sole trader business will weather the current financial storm and come out stronger on the other side.

Research suggests that some 2.3m adults in the UK now hold cryptoassets (also called cryptocurrency, crypto tokens or just “crypto”). That figure has increased by more than 400,000 since 2020 (source: Financial Conduct Authority), with more and more of us investing in cryptocurrencies.

Reportedly, UK cryptocurrency investors are typically men aged over 35 in professional or managerial jobs, holding an average of about £300 of cryptocurrency. That’s a relatively small investment, but it’s increasing each year (in 2020 the average was £260).

About two thirds of UK cryptocurrency investors have invested in Bitcoin, which was launched in 2009 and is the world’s biggest and best-known example. But other popular cryptocurrencies include Ethereum, Litecoin, Ripple, Bitcoin Cash and Bitcoin SV.

Read on to find out:

• what cryptocurrencies are
• what makes cryptocurrencies different
• tax liabilities when you’re an individual investor
• tax liabilities when you’re a business investor.

What is a “cryptocurrency”?

Cryptocurrencies are digital assets. According to HMRC: “Cryptoassets are cryptographically secured digital representations of value or contractual rights that can be transferred, stored [and/or] traded electronically.”

You can’t spend cryptocurrencies in the shops and they have no inherent value; their value is determined only by how much someone is prepared to buy them for. Cryptocurrencies are bought and sold via a peer-to-peer online network. Their value can go up or down, which can make them a good or bad investment.

The word “crypto” means secret or concealed, which goes some way to explaining the concept of cryptocurrencies, of which there are now thousands. Secure encryption of data and communication is key to cryptocurrencies.

Cryptocurrencies are decentralised open networks. Unlike more familiar currencies, they’re not managed or controlled by government or a central authority such as the Bank of England or the US Federal Reserve. Ownership data is stored and shared via ‘Distributed Ledger Technology’ (ie an online/digital database which lists transactions). Anyone anywhere can send and receive payments and transactions, without the need for verification from a bank. Investors keep their cryptocurrencies in a digital wallet and can buy and sell at will.

How does HMRC view cryptocurrencies?

If you’re considering investing in one or more cryptocurrencies, naturally you’ll wonder about the tax implications.

As explained on government website GOV.uk: “HMRC does not consider cryptoassets to be currency or money. On its own, owning and using cryptoassets is not illegal in the UK and does not imply tax evasion or any other illegal activities.”

Moreover: “The tax treatment of all types of cryptocurrency depends on its nature and use – not its definition.”

Cryptoassets and tax – individuals

People buy cryptocurrencies either hoping their investment will grow over time or to make certain purchases. That’s why they’re required to pay Capital Gains Tax if they sell cryptocurrency tokens, exchange them, use them to pay for good or services, give them away or even donate them to charity. You can claim a CGT allowance and some allowable expenses are deductable. GOV.uk explains the cryptoasset records you must keep and how to report them.

You must pay Income Tax and National Insurance contributions (NICs) on cryptoassets if you receive them from your employer as a non-cash bonus/benefit/payment.

If HMRC believes that you’re trading in cryptocurrencies rather than occasionally investing, you’ll be expected to pay Income Tax rather than Capital Gains Tax. There can also be implications relating to Stamp Duty, Inheritance Tax and pension contributions.

Many cryptoassets are traded on exchanges that don’t use UK currency pounds sterling, so the value of any gain or loss you make must be converted into pounds when completing your Self-Assessment tax return.

• Further tax guidance for individuals regarding cryptocurrencies is available on GOV.uk.

 Cryptoassets and tax – businesses

Businesses that buy or sell cryptocurrency (tokens or a denomination of a cryptocurrency), exchange them for other assets (including other cryptoassets) or provide goods or services in return for tokens, are liable for tax, whether Capital Gains Tax, Corporation Tax, Corporation Tax on Chargeable Gains, Income Tax, National Insurance contributions, Stamp Taxes and/or VAT.

The amount of tax the business must pay on cryptocurrency is determined by its turnover, costs, profits and gains. Obviously, these are declared each year to HMRC via Self Assessment for sole trader businesses and Corporation Tax returns for limited companies.

As stated on GOV.uk: “Generally, for Income Tax or Corporation Tax, profits from a trade involving cryptoassets must be calculated in accordance with Generally Accepted Accounting Practice, subject to any adjustment required or authorised by law.

“HMRC will consider each case on its own facts and circumstances. It will apply the relevant legislation and case law to determine the correct tax treatment (including where relevant, the contractual terms regulating the exchange tokens).”

If your cryptoassets are traded on exchanges that don’t use pounds sterling, the value of any gain or loss you make must be expressed in pounds sterling when completing your tax returns.

Tax and cryptoassets: looking ahead

According to HMRC, how cryptoassets are taxed will continue to develop as a result of the ever-evolving nature of the technology used and the areas in which cryptoassets are used. “As such, the facts of each case need to be established before applying the relevant tax provisions according to what has actually taken place (rather than by reference to terminology). Our views may evolve further as the sector develops and HMRC may publish amended or supplementary guidance accordingly.”

More information

• Visit government website GOV.uk to download HMRC’s Cryptoassets Manual, which provides more detail on taxation of cryptoassets.

Whether to pick up supplies, drop off deliveries, see customers or make site visits to quote for jobs, each year many self-employed sole traders rack up thousands of miles on UK roads while running their business.

You may be self-employed and use your own vehicle to drive far fewer miles for business reasons, but even so, you should still claim your mileage allowance. After all, as well as fuel costs, business journeys help to cause wear and tear that can lead to expensive maintenance and repair bills. And, crucially, the more allowances and expenses you claim, the higher your self-employed earnings.

What is mileage allowance?

If used for business, you may be able to claim a proportion of the actual total cost of buying and running your vehicle, including such things as insurance, repairs, servicing, fuel, etc. This option may or may not enable you to claim more. However, keeping track of every cost and working out the exact proportion of business use for your vehicle takes time and effort.

Instead, many self-employed people claim mileage allowance, a flat-rate scheme that provides a much simpler way to claim back the cost of using your own vehicle for business. Mileage allowance is part of a range of “simplified expenses” options that HMRC offers to self-employed people. They’re designed to make tax admin easier and quicker.

How much mileage allowance can you claim?

If you’re self-employed, you can claim a mileage allowance of:

• 45p per business mile travelled in a car or van for the first 10,000 miles and
• 25p per business mile thereafter
• 24p a mile if you use your motorbike for business journeys.

If you use more than one of your vehicles for business, you don’t have to use the flat-rate mileage allowance option in all cases, you could claim the actual cost for some, and mileage allowance for others. However, once you start using the flat rate mileage allowance option for a vehicle you use for business, you cannot change.

If you travel with someone else who also works for your business, as the driver, you can claim an additional 5p per mile for each extra passenger. So, if three of you travel together, you can claim 45p + 10p per mile (two x 5p per mile for the two additional passengers) for the first 10,000 miles, then 25p + 10p per mile thereafter.

Need to know! Claiming mileage allowance doesn’t stop you claiming for other business travel expenses, such as train tickets and taxi rides. Parking tickets and toll fees while on business can also be claimed as a legitimate business expense.

When can’t mileage allowance be claimed?

You can’t claim mileage allowance for personal journeys, they must be made “wholly and exclusively for business purposes”. And neither can you claim mileage allowance for journeys to and from your usual place of work (ie your commercial business premises). You can claim for travel to a temporary workplace, for example, if you’re a plasterer who needs to travel to different sites and jobs.

Simplified expense claims can’t be used for cars designed for commercial use, such black taxicabs or dual-control driving instructors’ cars. Limited companies cannot use simplified expenses either, as they’re only available to self-employed people.

Need to know! You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for or one you’ve included as an expense when you worked out your business profits. Where necessary, seek guidance from an accountant.

Three example mileage allowance claims

1. You’ve driven 1,200 business miles in your car during the year.

Calculation: 1,200 miles x 45p per mile = £540

Annual mileage allowance = £540

2. You’ve driven 10,000 business miles in your van during the year. Calculation: 10,000 miles x 45p per mile = £4,500
   Annual mileage allowance = £4,500
3. You’ve driven 12,000 business miles in your car during the year. Calculation: 10,000 miles x 45p per mile = £4,500, plus, 2,000 miles x 25 per mile = £500
   Annual mileage allowance = £5,000

Working out your business mileage

Logging your business mileage is a good idea, as it can make it far easier to later work out and claim your mileage allowance. And your claim is more likely to be accurate and credible if HMRC can see precise details of dates, miles travelled, journeys and reasons. HMRC can request proof during an investigation.

It can be wise to get into the habit of recording details after every journey for which you plan to claim mileage allowance. Manually recording your business mileage takes more time and effort, while scraps of paper and notebooks can go missing, so it’s better to record and store your mileage details in a spreadsheet/software, with data stored safely online. Many apps have been created to help business owners track and record their business travel mileage (some even use GPS to automatically measure business mileage).

Some self-employed business owners simply estimate their business mileage, by claiming for a percentage of their vehicle’s total annual mileage. So, if your car does 1,000 miles a month and you can show that half of that is for business use, you can claim mileage allowance of 6,000 miles a year (ie £2,700).

How to claim mileage allowance

Good accounting software will do all of the hard work for you, saving you lots of time and hassle. You enter your business mileage and it calculates your mileage allowance, which you enter into your Self-Assessment tax return. The amount is taken into account and your tax liability is reduced as a result.

If you use simplified expenses to claim mileage allowance, you cannot claim for motoring costs such as insurance, road tax or fuel, because these are accounted for within the mileage allowance.

Need to know! Deliberately inflating your mileage allowance claim can lead to penalties. HMRC takes a very dim view of anyone who deliberately enters false information into tax returns.

For more information

• Visit government website Gov.uk to read Travel – mileage and fuel rates and allowances. There is also an online tool that enables you to Check if simplified expenses could save your business money.

As we know a hobby is an activity performed for fun, whether that’s making art prints of movie stills or teaching guitar basics on YouTube. When this activity becomes monetised, that’s when the attention of HMRC is drawn and the hobby may be regarded as a business.  

As an accountant you will be aware that once the income (not profit) exceeds the annual trading allowance of £1,000, the income needs to be declared to HMRC.  

Rachel Rutherford, Director of Policy and Public Affairs added “If the sole purpose of the activity is to turn a profit, then this is a business and HMRC must be advised once the annual income exceeds £1,000. Of course, there will be people who might just be selling old clothes on the likes of eBay or Depop in order to make a little pocket money, and if these are personal possessions then there is no need to report this to HMRC. 

“To help keep your clients on the right side of the taxman, we’ve invited Mike Parkes from strategic partner, GoSimpleTax to explain this further – as well as outline the next steps if it’s required to report taxable income.” 

What is the trading allowance?

Selling across the likes of Facebook Marketplace, Etsy or eBay in spare time, there is a set amount of money allowed to be earnt before there is a requirement to tell HMRC. The trading allowance allows earnings up to £1,000 a year tax-free. 

Keeping a log of all sales made across each platform ensures the amount is not exceeded, giving protection in the event of a HMRC investigation. Should this be the only income then no tax will be paid until more than the personal allowance is earnt. 

A reminder of the personal allowance 

The Personal Allowance is the amount of taxable income made before Income Tax is incurred. It factors in employment earnings, rental income, and any additional online trading profit made – among other sources. Therefore, if the items sold online result in less than £12,570 annually (the Personal Allowance as of 2021/22), and there are no other sources of income, there won’t be any Income Tax charged. 

Once that amount is exceeded, there will be tax: 

• 20% on the portion of earnings between £12,571 and £50,270 
• 40% on the portion of earnings between £50,271 to £150,000 
• 45% on the portion of earnings over £150,000 

The same is true if tax is paid through PAYE at a current employed role, and earn more than the trading allowance. Income Tax will be charged according to the total amount of taxable income that is earnt. 

Is a tax return required?

A Self-Assessment tax return is required if the trading allowance is exceeded, regardless of whether or not there is also employment. Within the self-assessment it is required to report the sales made along with anu associated business expenses. However, before this can be completed it is a requirement to register for self-assessment and this will depend on if you’re self-employed or not. 

Once registered, a letter will be sent with a Unique Taxpayer Reference (UTR) number on. This reference number is essential to using HMRC’s Self Assessment service and takes 10 days to arrive, so remember to register long before the deadline.  

An activation letter will also arrive with an activation code – when both are received it is possible to start a self-assessment tax return. 

Can the tax bill be lowered?

When HMRC treats online selling as a business, then the eligibility for the benefits of business expenses comes into play. Business expenses are purchases made that can be claimed back on in a tax return, provided the purchase was for business purposes. For example, claims could be made on: 

• Office supplies – any stationery used, envelopes or printing costs
• Delivery costs – postage and packaging costs
• Website charges – either for a website owned or the fee of the seller site
• Bank and credit card fees – charges incurred from selling online
• Marketing and advertising costs – any adverts ran on seller sites 

There could be a possibility to be able to reduce the cost of running a home! A portion of utility bills, council tax, and telephone and internet costs can be considered a business expense, depending on the amount of time spent using a house as a base for the online selling. All that is needed is to keep a log of the expenses being claimed, and store evidence for them should HMRC ask for it, potentially reducing the total tax bill. 

Getting the most out of online sales for your clients

If a hobby tips slightly into business territory, don’t panic. Registering for Self-Assessment and completing a tax return is straightforward provided your clients have the right tools and act early. If sales exceed £1,000, register your client as soon as you can, and ensure they keep records of income and expenses to include them on their tax return. 

From there, you’ll be able to work out their profit and possibly lower their total bill by making sure they have recorded all allowable expenses.  

There are always some clients who prefer paper-based accounting. Reluctant or uninterested to learn to use new tools, they prefer physical copies over digital documents. But this comes at a cost – to both them and you.

By transitioning to digital, not only will your clients’ accounts be easier to manage, but they’ll take a fraction of the time to process, enabling you to work on other elements of your practice.

We’ve asked Mike Parkes from GoSimpleTax  to explain more, and highlight how accountants can benefit from going paperless.

Offer real-time answers and advice

Paper, by nature, is chaotic. You’ll need filing cabinets, meticulously labelled, to accurately record each of your clients’ accounts – up to six years of their accounts, in fact, to ensure that they’re covered if HMRC launch an investigation into their tax return. That’s sure to take up a lot of space, and it also doesn’t provide you with an easy-to-access overview of what any of your clients owe the taxman.

Digital files, on the other hand, are much easier to read. Especially if you invest in a tax return solution like GoSimpleTax. Tools like these allow you to record client income and expenditure in real time, meaning that whenever a client asks for their expected tax bill, you can answer in just a few clicks.

As a professional advisor, this allows you to submit an accurate tax return on their behalf and help them manage their cash flow. Plus, as some tax return software providers also highlight any opportunities to claim tax relief, there’s an extra incentive for your clients to stay on top of their record-keeping.

Record income more easily

Another benefit of going digital is the ease with which you can record client income. At the moment, you have to log each of your client’s paid invoices into their tax returns. But with invoicing tools, that all changes.

By using software to request payment, any invoices paid will automatically update their accounts. For example, if a client receives payment for an invoice you sent, their predicted tax bill will be automatically updated based on the amount of that payment. This saves you time and also unifies two of your practice’s most important services: invoicing and the tax return.

You can also use these digital tools to understand when to schedule sending invoices as well as the follow-up emails to ensure that their customers pay on time. Integrations with online payment solutions like SumUp and PayPal can additionally help your clients’ customers pay them more quickly using a debit or credit card, saving you from chasing payments in the first place.

Each of these payments will then filter into your clients’ tax returns, making the 31st January tax return deadline much easier.

Enhance security

Tax return and invoicing software also allows you to log all client income and expenses in the system. That means no more hoarding scraps of paper for your customers – instead, they can take photos of their expenditure and you can upload it to the cloud, where it’s secure and less likely to be stolen.

This is true of all client information in fact. As data processed online is governed by GDPR, customer information is often safer when stored on software as opposed to in your drawers. What’s more, they’re backed up in the event of data loss.

Be MTD-ready

Last but not least, going digital means you’ll be ready for upcoming legislation. Making Tax Digital (MTD) was a government initiative launched in 2019 to gradually digitalise the UK tax system. It started with MTD for VAT, which stipulated that VAT-registered businesses with a taxable turnover above the VAT threshold would need to digitalise their accounts by 2022.

Soon this will extend to all self-employed individuals with an annual income above £10,000. The reason for this is that the government believes, by using software to submit tax returns, there will be fewer avoidable mistakes. These mistakes cost the government £8.5 billion in 2018/19.

By adopting this software now, you’re able to effectively onboard all your paper-based clients well ahead of the MTD for Income Tax roll-out date. So, not only will you be compliant with the incoming legislation, but you’ll also benefit from a streamlined workload well ahead of your competitors.

It’s time to go digital

After 2020, accountants should be looking to add value to their service in a way that protects both the needs of their clients and the needs of their practice. Many sole traders will be reeling from the pandemic, and you’ll need to stress how your services are essential to their success.

Traditional bookkeeping won’t be enough. However, by digitalising your clients’ accounts, you can offer a more comprehensive solution. This doesn’t require any additional effort on your part. Simply by adopting tax return and invoicing software, you can start alerting them of opportunities to claim expenses and even simplify their payment request process.

With Making Tax Digital for Income Tax around the corner HMRC will be moving away from maintaining their own software. Now is the time to switch to digital.

Digital software helps those that need to submit a tax return keep on top of their bookkeeping. But that’s just the beginning. We’ve asked Mike Parkes from AIA strategic partner GoSimpleTax to better explain the benefits.

1. It’s easy to use

Unlike the HMRC portal, the majority of digital tools are really easy to use. That’s their core selling point: simplifying your clients tax return process.

2. You can get tips on how to make savings

Opportunities to lower your clients tax bill are highlighted to you by some software providers. GoSimpleTax, for instance, can point out payments that qualify as allowable expenditure.

Not only does this help you save some cash for your clients, but it also helps plan your clients finances for the next year.

3. You can find out what you owe at all times

‘I always encourage our clients to file early. Why? Because filing early lets you know how much your tax bill will be in advance.’ Say a lot of accountants – getting this to happen on the other hand can be hard work. But even before you file, most digital software providers allow you to see an estimate of your clients bill at any time. They take the income and expenditure information that you input throughout the tax year and automatically calculate how much Income Tax they will owe in advance of any deadlines.

4. It’s MTD-compliant

While not a concern right now, come 2023, HMRC will expect you to have brought your clients tax return process online. As part of their Making Tax Digital (MTD) campaign, all sole traders and other Self Assessment users will be expected to file online in a certain way.

Failure to do so might result in a fine. But if you choose to use a digital tool to file, you can rest easy. Most of them are MTD-compliant and provide the crucial ‘digital link’ to HMRC.

Whatever platform you decide on, you and your clients will immediately recognise the benefit of using digital software to send tax returns instead of using HMRC’s own portal.

Whether you’re client is new or not to self-employment, record-keeping might sound like hard work to them – and certainly will be to you when they have days to spare for the deadline and cannot find ‘that receipt’. And while that may be true, it does come with its own reward – namely, that sole traders can claim back allowable expenses and pay less tax on their earnings.

HMRC has a number of rules about record-keeping though. Mostly, they relate to the storage of receipts and other documentation after you’ve filed your Self Assessment tax return for that tax year. By not adhering to them, your client can run the risk of losing out on any tax relief – or worse, being penalised by HMRC.

So, to ensure you get the tax-saving benefit of expenses, we’ve asked Mike Parkes from GoSimpleTax to set the record straight on record-keeping and provide guidance on how to help your clients claim.

What expenses can sole traders claim for?

There’s a whole host of expenses your client can claim as a sole trader, and they can potentially net them big savings if you utilise all that are available to you. Generally, people are aware that equipment purchases qualify as expenses, but there are many others.

They include:

Travel and accommodation

If your client is a sole trader they may have to cross up and down the country for long stints at a time, basing themselves near a site far from home. Luckily, HMRC considers hotel stays viable expenditure. The accommodation records (how long you’ve booked) should be as close as possible to the proposed timescale of the project you’re there to oversee.

You can also claim tax relief on mileage or travel bookings made over the year, as well as meals on overnight trips. To ensure you stay within the bounds of eligible allowances, it’s worth consulting the gov.uk website.

Legal and financial costs

Your services as an accountant to support their venture, you can claim on their behalf your total costs. This may also be the case for any other professional services they may need for business purposes. Likewise, you can claim against bank costs such as overdraft and credit card charges. Costs like professional indemnity insurance premiums and lease payments can be claimed back, although there are rules if you’re using cash basis accounting.

Marketing costs

As your client is using these services purely for the purpose of driving their business forward, HMRC will permit marketing exercises as eligible expenses. That’s great news for sole traders who use flyers to drum up work, for example, or need a website that advertises their services.

Clothing Expense

While your client operates as a self-employed individual, they may also represent certain authorities when they’re caring for patients or vulnerable people. As a result, it may be expected to purchase a uniform or your own PPE.

Fortunately, you’re able to claim for it as an allowable business expense. Provided that what you’re purchasing is either a uniform or necessary protective clothing needed for your work, you’ll qualify for tax relief.

What’s more, if you need to purchase any additional PPE for your role (say, gloves and face masks), this is also considered an allowable expense.

Rent for premises

If your client rents a space purely for business purposes, then that too can be classed as an allowable expense.

Utilities

If your client works from home, you’re entitled to claim a proportion of the gas, electric, water, broadband and telephone bills as allowable expenses. There’s no exact science to this, but generally you’d divide the bill by the number of rooms in your house and then divide that figure based on the amount of time you work from home. The GOV.UK website has a good example. If that sounds too complex, then you can claim simplified expenses.

Subscriptions

If your clients freelance work requires you to pay a membership fee or would benefit from the purchase of a trade publication, these costs can be claimed back on. However, this does not extend to political party subscriptions.

These are just some of the examples of expenditure that you can claim on, but they highlight the wealth of opportunities available to all sole traders – provided they keep the relevant records. Claiming these expenses through your clients Self Assessment tax return helps to further reduce their tax liability and maximise their take-home pay.

What records should be kept?

In order to qualify for tax relief, your clients need to be able to present receipts when asked by HMRC. But to be wholly compliant, expenses aren’t the only figures you’ll need to report. In fact, if you’re self-employed, you’re legally required to keep records of the following:

• All sales and income
• All business expenses
• VAT records if you’re registered for VAT
• Records about your personal income
• Your COVID-19 support grant

You won’t need to submit all of the above as part of the Self Assessment tax return. However, HMRC may ask you for them should they launch an investigation. Additionally, it helps you to work out your clients taxable income when filing.

If HMRC does launch an investigation, you’ll need to provide evidence of your clients finances. This will need to come in the form of:

• Receipts for goods and stock
• Bank statements and chequebook stubs
• Sales invoices, till rolls and bank slips

Only with all of the above will you be able to safely claim any relevant expenses and stay on the right side of the taxman.

How long should records be kept?

Where businesses have to store receipts for six years, sole traders are only required to store theirs for five. That’s at least five years after the 31st January submission deadline of the relevant tax year.

This allows HMRC to investigate your clients accounts over a long period of time should they believe it necessary. Obviously, if you have claimed relief but misplaced the evidence, you may be penalised by HMRC all the same. So it’s best to tell your clients to invest in more than a wallet or a desk drawer for your receipts.

Where should records be stored?

Ideally, electronically. Train tickets and similar paper receipts are near impossible to keep in good quality for that length of time – especially if your client is lugging them around for up to five years in their coat pocket. You could have a physical filing system, but the amount of admin that would be required to keep it in order could quickly get exhausting.

Tax software, on the other hand, allows your clients to store certain documentation online. Some allow users to take photos of receipts from their phone, for instance. They can then upload the image to the app, keeping it secure in case you ever find yourself under investigation.

However, it’s worth bearing in mind that there are documents that HMRC will expect you to hold on to in their original form. Such documents usually show that you’ve had tax deducted. For example, if you’ve been an employee in that tax year, your P60 will prove your exemption.

Are you conscious you will not be able to use the government gateway for MTD for income tax?

GoSimpleTax software submits directly to HMRC and is the solution for accountants and sole traders alike to log all their income and expenses. The software will provide you with hints and tips that could save you money on allowances and expenses you may have missed.

Trial the software today for free – add up to five income and expense transactions per month and see your tax liability in real time at no cost to you. Pay only when you are ready to submit or use other key features such as receipt uploading.

Recently, there has been a wave of interest in self-employment, as accountants you may have taken on some new clients. It makes sense, COVID-19 has proven that a large number of industries perhaps aren’t as resilient as once thought. And if you can achieve self-sustainability and climb your own ladder, why not try to do it now?

But while it’s exciting to build something of your own, you need to make sure you’re square with HMRC. To help, we’ve asked Mike Parkes from GoSimpleTax for his guidance. Here, he walks you through everything you will need to know about tax when working for yourself.

Register with HMRC

First things first, your client may need to set up as a sole trader. This involves the fun task of deciding on their business name.

Then, provided that they earned more than £1,000 in the last tax year, they need to register for Self Assessment with HMRC. It’s not an immediate legal requirement, although you will have to be registered by the 5^th October of your second tax year. If you aren’t, they risk being penalised by HMRC.

To register, there are one of three forms they will need to fill out depending on the circumstances in which they are entering self-employment:

• Going self-employed for the first time and have not previously filed a Self Assessment tax return
• Going self-employed for the first time and have previously filed a Self Assessment tax return
• Registered as self-employed previously

All three forms can be found on the GOV.UK site.

For those who have not submitted a Self Assessment tax return before, they will be sent a 10-digit Unique Taxpayer Reference (UTR) number following their initial registration. The UTR will subsequently be requested of you in almost all interactions you have with HMRC moving forwards. It takes up to 10 days to arrive in the post, so don’t leave their registration to the last minute or they will run the risk of missing the Self Assessment deadline.

Know your expenses

When it comes to your clients Self Assessment, trust me when I say that expenses can make all the difference between being profitable… and being less so.

Now, we all know that sole traders can claim for some of their tools, travel and home office equipment. But what you might not know is that you can also claim for pre-trade expenses – in other words, items you purchased before trading to get your business to a point where it could open successfully.

This includes expenditure like:

• Advertising – Your business won’t survive on word of mouth alone, so be sure to hold on to receipts of any offline or online media spend you invest in.
• Rent for premises – If you rent a space purely for business purposes, then that too can be classed as an allowable expense.
• Insurance – Whether it’s employers’ liability insurance or public liability insurance you’re after, both can equally be covered by expenses.

What’s more, these pre-trade expenses may include items your client own privately that they are now going to use within your business, like a laptop.

Claiming these expenses through the Self Assessment tax return helps to further reduce your clients tax liability and maximise their take-home pay.

Keep records

Of course, you can’t claim anything if you don’t have accurate and up-to-date information off your client. And this isn’t just for the purposes of  expenses either. As a sole trader, they are obliged to keep clear records of all business transactions.

That means receipts, invoices and bank statements all need to be available should the taxman require them to be presented when under enquiry or investigation. Yet there are added benefits of doing this: it makes filling in the Self Assessment tax return easier, and keeps you aware of any opportunities to reduce your clients tax exposure.

What’s more, tax software like GoSimpleTax makes record-keeping easy. With us, your client has the option to take a photo of their paper receipts and upload them to the platform so you as their accountant has all the paperwork when you need it.